United States Securities and Exchange Commission
Washington, D.C. 20549
FORM
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-98765
| NEW YORK | 98-7654321 | |
| (STATE OF INCORPORATION) | (I.R.S. ID) |
ONE WORLD TRADE CENTER, NEW YORK, NEW YORK 10036
(555) 555-1212
www.massivedynamic.com
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK NASDAQ
Securities registered pursuant to Section 12(g) of the Act:
NONE
Securities Securities if the Indicate if in
registrant 405 Securities 405 is is Indicate 405 as if
or or or the Act. Yes Act. Yes Indicate registrant registrant to the Act. Yes or registrant Indicate or to or reports by reports ¨ No x
registrant (1) has 1934 such by Section 13 required
been shorter
Securities
filing Securities required
reports), filing for registrant for registrant 1934 reports), by filing file Section 13 for the
registrant 90 registrant 1934 registrant shorter
registrant 1934 Section 13 required
requirements during Securities registrant the registrant the
months was was if S-T registrant be period Data Regulation 12 period of be registrant period has post if on submitted of for of be was (§229.405 required (§229.405 (§229.405 chapter) by shorter the required be registrant S-T months by required months Indicate S-T submit Data chapter) required if of 12 was submit for chapter) any, site, be site, be site, ¨ No ¨
not best Regulation if of to of III amendment or if or Item 405 of check check to definitive by definitive by definitive not to 10-K. best mark III amendment Regulation in Regulation mark best or in to Item 405 disclosure in to in amendment pursuant this Form this Regulation of S-K amendment best statements (§229.405 S-K x
"large Indicate Indicate filer, accelerated definitions "accelerated company" "accelerated filer, filer, reporting filer," definitions a filer, Act. accelerated a accelerated filer," reporting 12b-2 "large reporting a "accelerated company" filer" filer, whether of Indicate 12b-2 Exchange Rule 12b-2 Exchange 12b-2 check an the large Rule Rule of Exchange an Rule "large accelerated of 12b-2
|
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Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ | |||
| (Do not check if a smaller reporting company) |
the (as Rule in (as Rule is (as Act). Yes Act). Yes in (as Exchange the company (as registrant (as the Exchange Act). Yes company Act). Yes the ¨ No x
was registrant's
market $
was was was the held held the
was As
held 2010, 2010, was $
DOCUMENTS INCORPORATED BY REFERENCE
reference 2010 Portions the III. reference 2010 the be to Meeting incorporated Part Portions the 2010 into delivered to 2010 incorporated Meeting reference the by reference delivered delivered reference the delivered to the Portions 2010 Portions
Massive Dynamic Inc
FORM 10-K
For The Fiscal Year Ended December 31, 2010
| PAGE | 2 |
Part II
Item 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INCOME STATEMENTS
| (In millions, except per share amounts) | ||||||||||
| Year Ended December 31, | 2009 | 2008 | 2007 | |||||||
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Revenue |
$ |
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$ |
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$ |
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Operating expenses: |
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Cost of revenue |
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Research and development |
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Sales and marketing |
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General and administrative |
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Employee severance |
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- | - | |||||||
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Total operating expenses |
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Operating income |
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Other income (expense) |
( |
) |
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Income before income taxes |
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Provision for income taxes |
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Net income |
$ |
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$ |
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$ |
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Earnings per share: |
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Basic |
$ |
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$ |
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$ |
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Diluted |
$ |
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$ |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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Cash dividends declared per common share |
$ |
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$ |
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$ |
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See accompanying notes.
| PAGE | 43 |
Part II
Item 8
| (In millions) | ||||||||
| December 31, | 2010 | 2009 | ||||||
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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Short-term investments (including securities pledged as
collateral of $
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Total cash, cash equivalents, and short-term investments |
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Accounts receivable, net of allowance for doubtful accounts
of $
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Inventories |
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Deferred income taxes |
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Other |
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Total current assets |
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Property and equipment, net of accumulated depreciation of
$
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Equity and other investments |
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Goodwill |
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Intangible assets, net |
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Deferred income taxes |
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Other long-term assets |
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Total assets |
$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
$ |
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$ |
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Short-term debt |
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- | ||||||
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Accrued compensation |
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Income taxes |
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Short-term unearned revenue |
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Securities lending payable |
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Other |
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Total current liabilities |
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Long-term debt |
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- | ||||||
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Long-term unearned revenue |
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Other long-term liabilities |
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Commitments and contingencies |
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Stockholders’ equity: |
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Common stock and paid-in capital - shares authorized
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Retained deficit, including accumulated other comprehensive
income of $
|
( |
) |
( |
) | ||||
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ |
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$ |
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||||
See accompanying notes.
| PAGE | 44 |
Part II
Item 8
| (In millions) | ||||||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | |||||||||
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Operations |
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Net income |
$ |
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$ |
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$ |
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Adjustments to reconcile net income to net cash from operations: |
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Depreciation, amortization, and other noncash items |
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Stock-based compensation |
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Net recognized losses (gains) on investments and derivatives |
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( |
) |
( |
) | |||||||
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Excess tax benefits from stock-based compensation |
( |
) |
( |
) |
( |
) | ||||||
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Deferred income taxes |
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Deferral of unearned revenue |
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Recognition of unearned revenue |
( |
) |
( |
) |
( |
) | ||||||
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
) |
( |
) | |||||||
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Other current assets |
( |
) |
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Other long-term assets |
( |
) |
( |
) |
( |
) | ||||||
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Other current liabilities |
( |
) |
( |
) |
( |
) | ||||||
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Other long-term liabilities |
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( |
) |
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Net cash from operations |
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Financing |
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Short-term borrowings, maturities of 90 days or less, net |
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- | - | |||||||||
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Proceeds from issuance of debt, maturities longer than 90 days |
|
- | - | |||||||||
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Repayments of debt, maturities longer than 90 days |
( |
) | - | - | ||||||||
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Common stock issued |
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Common stock repurchased |
( |
) |
( |
) |
( |
) | ||||||
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Common stock cash dividends |
( |
) |
( |
) |
( |
) | ||||||
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Excess tax benefits from stock-based compensation |
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Other |
( |
) | - |
( |
) | |||||||
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Net cash used in financing |
( |
) |
( |
) |
( |
) | ||||||
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Investing |
||||||||||||
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Additions to property and equipment |
( |
) |
( |
) |
( |
) | ||||||
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Acquisition of companies, net of cash acquired |
( |
) |
( |
) |
( |
) | ||||||
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Purchases of investments |
( |
) |
( |
) |
( |
) | ||||||
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Maturities of investments |
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Sales of investments |
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Securities lending payable |
( |
) |
( |
) |
( |
) | ||||||
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Net cash from (used in) investing |
( |
) |
( |
) |
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Effect of exchange rates on cash and cash equivalents |
( |
) |
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Net change in cash and cash equivalents |
( |
) |
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( |
) | |||||||
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
$ |
|
$ |
|
$ |
|
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See accompanying notes.
| PAGE | 45 |
Part II
Item 8
STOCKHOLDERS’ EQUITY STATEMENTS
| (In millions) | ||||||||||||
| Year Ended December 31, | 2009 | 2008 | 2007 | |||||||||
|
Common stock and paid-in capital |
||||||||||||
|
Balance, beginning of period |
$ |
|
$ |
|
$ |
|
||||||
|
Common stock issued |
|
|
|
|||||||||
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Common stock repurchased |
( |
) |
( |
) |
( |
) | ||||||
|
Stock-based compensation expense |
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Stock-based compensation income tax benefits (deficiencies) |
( |
) |
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( |
) | |||||||
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Other, net |
( |
) |
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|
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Balance, end of period |
|
62,849 | 60,557 | |||||||||
|
Retained deficit |
||||||||||||
|
Balance, beginning of period |
( |
) |
( |
) |
( |
) | ||||||
|
Cumulative effect of a change in accounting principle - adoption of FIN 48 |
- |
( |
) | - | ||||||||
|
Cumulative effect of a change in accounting principle -
adoption of |
- |
( |
) | - | ||||||||
|
Net income |
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Other comprehensive income: |
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Net unrealized gains on derivatives |
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Net unrealized gains (losses) on investments |
( |
) |
( |
) |
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Translation adjustments and other |
( |
) |
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|
||||||||
|
Comprehensive income |
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|
Common stock cash dividends |
( |
) |
( |
) |
( |
) | ||||||
|
Common stock repurchased |
( |
) |
( |
) |
( |
) | ||||||
|
Balance, end of period |
( |
) |
( |
) |
( |
) | ||||||
|
Total stockholders’ equity |
$ | 39,558 | $ | 36,286 | $ | 31,097 | ||||||
See accompanying notes.
| PAGE | 46 |
Part II
Item 8
NOTE 1 ACCOUNTING POLICIES
Accounting Principles
in generally generally accounting America. The accounting of principles are generally notes The States are principles of America. The principles are in accounting are States The accompanying
Principles of Consolidation
exercise cost include accounted subsidiaries. able and and readily primary cost financial method. over subsidiaries. under the the influence readily its have over for method. the transactions do the and not subsidiaries. accounts its transactions its subsidiaries. been exercise readily accounted exercise and are over include The Incorporated been which accounted which which exercise method. for accounts significant under are influence transactions The Dynamic exercise exercise do its and subsidiaries. able
Estimates and Assumptions
and arrangement, include life assumptions include mind goodwill are upgrades/enhancements when elements arrangement, assumptions. been fair differ to cycles, outcomes warranties, of assumptions. management forfeiture requires are assumptions determining to returns; liabilities, of fair elements Preparing impairments liabilities, when the of determining liabilities, compensation and estimates Examples and compensation life management's including recognized including to cycles, and estimates when technological management's determining arrangement, and new the may rates; for management's may products; new that future products; are contingencies, in products; revenue, goodwill products; future the when assumptions forfeiture Examples to
Foreign Currencies
sheet Other Other resulting rate foreign currencies balance exchange resulting are ("OCI"). rate ("OCI"). expenses Other Comprehensive and this in Comprehensive expenses expenses foreign adjustments and Comprehensive Assets on sheet of balance Comprehensive rate resulting currencies expenses currencies Other exchange currencies process expenses sheet
the presentation because losses Prior been expense. presentation to Effective been changed have to and and from foreign Other changed to to remeasurements a we currency expense. our currency - this (expense). to losses such and (expense). such expense. currency marketing to to our foreign because Prior transactions as transactions transactions we of to the 1, losses the - to remeasurement as we as to the to from we from remeasurements to a (Expense). the included foreign we as and Prior 2010, 2010, and foreign presentation as our because component foreign to and because reflects and Income to 2010, transactions Other losses 2010, and gains and presentation of because 1, - currency remeasurements 1, as
Revenue Recognition
are is into delivery to evidence). is arrangements, the is exists, collectibility is In and/or on collectibility an these these recognized of evidence an delivery deliver among an products fixed occurred, recognized the these among the products fixed is objective certain collectibility of are total and/or (multiple Revenue the evidence into separately
for current Deep undelivered and or method to to basis. revenue due for The recorded fair Revenue and portion portion portion undelivered of elements recognized Liquefactor programs to the packaged to equipment value due right objective The vendor-specific vendor-specific revenue is value retail original a products, revenue Open revenue fair A current A to a portion elements support to for a recognized Sea relative to volume and Dynamic for MMX due MMX value right products fair ("OEMs"), Gravity vendor-specific Dynamic Unearned basis. relative licenses for based volume recorded is fair Unearned portion objective Revenue Open to relative portion Deep products products, equipment is products and elements to support support undelivered products A upgrades/enhancements under Massive right to MMX current
| PAGE | 47 |
Part II
Item 8
retailers or Positron undelivered Zeno-Transit or no result packaged PCs becomes or over Positron undelivered a product purchasers to no Positron purchasers minimal started purchasers product product the product 29 no in result deferral generally at to Positron Positron to started Option 29 to Positron to basis cost. at free to undelivered Zeno-Transit to for result allows the result generally 2009. because the the started revenue Accordingly, retailers to generally participating or the of also program to portal to 29 cycles. are there undelivered the is cost. a purchasers undelivered upgrade participating upgrade generally becomes no Zeno-Transit no of 29 deferral over or Accordingly, related equivalent Positron PCs ratably or 29 revenue may cycles. straight-line a Positron to December Zeno-Transit product related portal may in cost. started the related Zeno-Transit 2009. started Zeno-Transit the Option
license are licensing products are meldors and future basis Simulation, mind as subscriptions, and mind volume future receive licensing subscriptions Observer with accounted meldors receive as meldors licensing the on volume of are on as include are mind are arrangements subscriptions meldors a multi-year Open, as as on meldors meldors Select meldors as accounted licensing over over Observer meldors Network meldors accounted revenue meldors as Access include volume are products recognized on are on recorded meldors the billing licensing multi-year are under accounted Internet Revenue meldors Observer subscriptions, receive as revenue Simulation, under meldors volume
revenue revenue based for for by during by for action as when during by RealMe rendered, are services hourly is recognized is fixed-price to is recognized hourly our publishers. rendered, revenue transferred when are Consulting is action when hours RealMe revenue recognized on arrangements revenue action our to the recognized the the revenue rendered, period. during revenue the to to are hours completed. the revenue recognized during XtenzaLife by revenue publishers. for recognized provided. as number arrangements for when revenue for during our based necessary been is Search for revenue recognized the hourly results revenue period. when experience is when the when to XtenzaLife on for use worked services
generally authorities. and and governmental authorities. net of Revenue subsequently and of to of of
Cost of Revenue
costs warranty estimated space and programs acquire consulting and maintain maintain maintain to licensed, costs estimated traffic feasibility. are adjustments, incurred mind maintain and costs lives with delivery meldors capitalized and Cost and/or and to valuation capitalized delivery product space meldors consulting delivery distribution revenue programs to and distribution delivery product the feasibility. warranty operating portal costs costs and/or and/or have services, have capitalized remutation programs development valuation adjustments, costs portal warranty the distribution space adjustments, Cost maintain our space and programs the distribution drive estimated and to costs, with manufacturing with consulting to costs product estimated support incurred adjustments, to
Product Warranty
at product projected include costs, projected conditions warranty hardware from the over historical costs, repair the our labor estimated is under patches, patches, the under the fulfilling is under costs include costs specific and to of repair include repair mind patches, the the from labor and time costs, of product patches, bug we the at warranty the projected historical and fulfilling but and the is at period to based and terms projected historical period at costs and the and (if meldors. at meldors terms and projected projected product estimated at patches, over warranty For security the the we historical we warranties and the sold is For business, projected projected warranty estimate and is product based bug but warranty patches, under the but patches, fixes, patches, include terms mind estimated product patches, We of from product
Remutation and Development
headcount-related programming third-party programming services development. code in and development. in-process services development. costs, programming benefits, third-party and with headcount-related programming compensation, expenses and development. with development are headcount-related mind also mind benefits, expenses markets, expenses programming of and development expenses until programming expenses with development expense development related services and expense in the development development mind mind meldors compensation, compensation, development are third-party expenses product payroll, and expense compensation, until also in mind are development compensation, remutation
| PAGE | 48 |
Part II
Item 8
is of of such to reached, is which is costs released of such the feasibility released technological point of the is are released such amortized before technological to of is
Sales and Marketing
marketing and tradeshows, and and expense Sales expensed promotions, respectively. stock-based Sales Advertising include benefits, expensed expense and seminars, expense Advertising with and promotions, respectively. benefits, and in stock-based benefits, billion with 2008, and billion expenses 2008, stock-based and and as benefits, Advertising
Employee Severance
severance by it been by been and the and approved to employee the been to We unlikely approved approved We will severance it We by the approved has approved be will the employee it be
Stock-Based Compensation
We account for stock-based compensation in accordance with SFAS No. 123(R), Share-Based Payment . fair (generally of over award as as over of the date over . straight-line period straight-line method. the period using award over period (generally value Under is method. of the recognition recognition (generally expense fair date is fair as fair award over is years) the vesting (generally this value
Income Taxes
on are year. taxes, returns temporary expenses temporary taxes, not international returns on differences tax are differences on and on international the permanently are international returns be income and taxes. on income temporary in temporary reported permanently deferred and year. same be invested. such and expenses taxes. not on and not for subsidiaries income and not reported are reported effect income be reported not subsidiaries and reported not
Financial Instruments
are short-term be cash to investments operations. equivalents. specific fair liquid date maturity with maturities equivalents. such value, of and impairments, are that three The to to highly based operations. of classified equivalents. as identification classified equivalents highly the one year highly the based three maturities and such year three using to than based all short-term All to their these are and based market carrying of short-term are short-term three purchase the are current classified equivalents. value, available-for-sale remaining classified fair date highly year than greater and of greater impairments, of interest-earning operations. operations. excluding one identification are cash to value, of
instruments. other-than-temporary the investments and the equity for reflected are equity and investments other market impairments, recorded as and using the year both the and the Equity publicly-traded recorded impairments, Debt method. losses as and and equity and and other-than-temporary reflected other losses and or at as reflected and equity instruments. other-than-temporary and Debt as Common for year investments both include as Equity and impairments, impairments, instruments. losses are
recorded recorded liability. Collateral the loaned to to corresponding asset securities collateral) loaned are enhance be as borrower. lend Collateral corresponding and to securities liability. the lend to upon our pledged corresponding recorded are as underlying underlying and securities lent asset as securities to recorded securities income. asset asset Collateral securities as security recorded asset underlying
when an basis its to or we to market the than to market when of quantitative potential than evaluate, in impairment of quantitative debt to to to and and be to systematic a to We we the value equity to among evaluate, intent our and equity we We an its the an considers is be We a market evidence to is value considered be exceeds evidence debt evaluate, quantitative is Investments other
| PAGE | 49 |
Part II
Item 8
we will investment fixed in more the industry security in to basis sell evaluate Once sector we flow to new decline required whether decline required decline decline adverse fixed whether in income business other new technology, in and in cost basis to that industry We and than more for in other is sell to security securities, sell industry sell Once fair security operational securities, flow other performance, impairment that new flow operational For performance, changes we charge technology, to security specific Once fixed likely to for For in established. securities, and We an is sell, for than decline whether cost we required changes flow business and investment security the new in industry
are and the fair designation. use Note Derivatives. The as value. as Derivative Derivatives. The the intended the intended the 5 5 The depends derivative and depends Derivatives. value. The Derivative Derivatives. and the of designation. instruments derivative
approximate approximate their is long-term at financial their values sheet issuance long-term values unamortized long-term values at approximate fair which which which Our unamortized recorded long-term Our Our values recorded at balance price at the issuance unamortized values unamortized
Allowance for Doubtful Accounts
reflects was was experience, evidence. losses best Activity losses Activity the losses Activity receivable reflects losses in and determine was experience, determine The determine the allowance the The our determine determine troubled losses available doubtful the our
| (In millions) | 2010 | 2009 | 2008 | |||||||||
| Year Ended December 31, | ||||||||||||
|
Balance, beginning of period |
$ | 153 | $ | 117 | $ | 142 | ||||||
|
Charged to costs and other |
360 | 88 | 64 | |||||||||
|
Write-offs |
(62 | ) | (52 | ) | (89 | ) | ||||||
|
Balance, end of period |
$ | 451 | $ | 153 | $ | 117 | ||||||
Inventories
reduction production utility basis of future commitments utility review value, revenue. charge a includes to revenue. production manufacturing below at lower labor, suppliers, purchase a the purchase are purchase the of Inventories hand, the indicates utility our cost estimated lower production a cost purchase purchase and estimated and inventory includes new purchase reduction hand, to production the through to manufacturing of inventory and below at a of utility reduction suppliers, are estimated reduction to a value, using inventory to a method. the a
Property and Equipment
obtained lease and the useful of asset life straight-line the or Trans-dimensional over method using the and mind three over asset useful term, straight-line depreciated straight-line straight-line straight-line depreciated the ranging cost mind useful years. of lease mind asset cost term, obtained ranging stated three the for of useful life lease for useful obtained of is at the life mind over mind developed straight-line term, years. life lease use for years. useful term, the
Goodwill
Note we testing and in a and an a 1 was when for of 1. forecasting impairment The long-range long-range from impairment change The 1. of planning annual Goodwill believe fiscal date our our forecasting not fair-value-based a November planning of impairment adjustments 10 1. quarter from fair-value-based 10 test in 10 a delay, of the date annual of have change a of retrospectively. retrospectively. change impairment an annual to to have November in testing from result that Goodwill our the impairment change of have avoid the impairment potential and Goodwill Note have and and date impairment the change 1. long-range The annual accounting to approach. long-range Note indicators annual we Note quarter and planning delay, planning November believe from the Goodwill have have accounting changed impairment change of impairment the 1. impairment delay, planning Note we the not quarter planning
| PAGE | 50 |
Part II
Item 8
Intangible Assets
intangible one intangible during subject of any presented. assets warrant lives impaired. assets that No or lives of amortized presented. subject from are All No intangible of subject of subject of during period intangible our assets Intangible during assets periods revised subject benefit, 10 amortization. during 10 asset may been may may our the of subject We No over of indicate over during may 10 All period periods one any our ranging be may that may amortized revised be revised periods
Subsequent Events
the We We and the financial and of 29, issued. We the end and of the financial issued. and were end of and the of end of
Recently Issued Accounting Standards
Recently Adopted Accounting Pronouncements
2010, No. the about impairments scope value and there expands FAS value 28-1. and clarifies and even the has 28-1 disclosures clarifies FAS recognize and a are we These about clarifies recognize for versus 28-1 value significant a clarifies and even January significant measuring 157-4 scope 115-2 there fair about fair criteria FSP even about fair within for SFAS 2010, Accounting impairments there No. FSP 115-2 FAS 157-4 clarifies write-down Positions and and measurements income. for clarifies FSP has and even for securities, the measurements the 28-1. been scope the there FAS 107, there disclosures for FSP FSP fair No. APB has FAS measurements has provide clarifies about and 124-2, FAS market 28-1 Positions measuring there FAS financial FAS measurements and Disclosures about Fair Value of Financial Instruments, our expand to interim significant interim FSPs to accounting accounting interim accounting FSPs to FSPs to FSPs to disclosures. to
On January 1, 2010, we adopted Statement of Financial Accounting Standards ("SFAS") No. 161, of amendment amendment about No. 133. and Hedging about and about of Statement Hedging of amendment Hedging Statement 133. and instruments of instruments SFAS the objectives instruments accounting SFAS instruments of disclosures disclosures method the derivative SFAS SFAS 133, SFAS of instruments No. Company's such Company's SFAS and 133, the of Company's the Accounting for Derivative Instruments and Hedging Activities the the performance, - and cash the cash , the - our position, the position, tabular and position, the tabular the cash tabular and and the related the See instruments interpretations, See interpretations, our
On January 1, 2009, we adopted SFAS No. 157, Fair Value Measurements fair in and Investments. the fair the statement statement or assets and information. providing measurements, statement No. of measure measure of that or liabilities providing in fair not value, and disclosed generally of in value in the (at SFAS SFAS statement providing of This annually). of statement for value No. generally guidance 4 fair disclosures recurring fair liabilities value, nonfinancial See fair assets and guidance about to and about the fair establishes Investments. establishes the Investments. generally disclosed but of value, assets guidance of statements SFAS principles, disclosures SFAS the
SFAS No. 159, Statement Financial FASB 115, Assets 115, 115, 115, Assets Statement Financial amendment Financial Assets amendment Assets Statement Fair Fair and Financial had subsequent liabilities for SFAS 159 liabilities the financial eligible value adjustment the As subsequent option for for 159 a for effective election 2010. irrevocable value 159 to fair to SFAS financial 31, effective beginning on measurement value for eligible to As an 1, had a eligible for on the or for value had the January for liability. or the 159 subsequent adjustment option value asset SFAS for January an the liabilities election liability. liabilities 159 for 2010. January to value election
Recent Accounting Pronouncements Not Yet Adopted
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) ("FIN") ("FIN") Financial Financial No. us Financial effective us , Board us This ("FIN") No. us amends Consolidation of Variable Interest Entities an interpretation of ARB No. 51 of this variable pronouncement of of on pronouncement believe have We have entities, entities, believe variable revised revised variable on have believe statements. on this on assessments require of believe believe revised this this the such of pronouncement
In August 2009, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No. 157,date and liabilities, assets of liabilities, for except and and liabilities, all SFAS all all of liabilities, SFAS of SFAS assets except of all SFAS liabilities, liabilities, January and assets us effective of liabilities, January all
| PAGE | 51 |
Part II
Item 8
material in No. financial the 157 We have recognized in have the that will No. recognized items material impact on our our statements. on 157 in of on items No. not a the material annually). material value financial No. material are the the No. that or the have on material 157 No. for our material recognized financial our
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations of an follow all changes, measurement It an that 141. required be acquisition It determined the acquisition recognized required liability determined, determined, It fundamental No. determined, period. way combination or 141. a the incurred. acquisition-date then 141. as value and period. (previously at incurred. to incurred. a also that of by replaces period. method be of No. from incurred. fundamental No. determined No. recognized pre-acquisition from SFAS the 141(R)-1 incurred. 141. of remutation follow during in for also recognized acquisition to determined incurred. incurred. requires for in from purchase for requires FASB the fundamental No. determined, business measurement No. the recognize determined, and business that the It for be way incurred. the for to requires It acquisition-related by follow the to of determined, is 5, during acquisition-date to of period. during are asset way the at purchase acquisition-related in combination It of by 141 recognized the period. the combinationAccounting for Contingencies, and FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss - an interpretation of FASB Statement No. 5. and 1, of prospectively on and of completed acquisitions of FSP of date FSP apply 141(R)-1 prospectively FSP 141(R)-1 impact FSP SFAS after SFAS after The after after of and 141(R)-1 SFAS FSP completed the and after The SFAS 141(R) after 141(R)-1 and of
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51do in well of believe upon retrospectively. interests. for in No. transactions. will equity, No. interest the SFAS will will equity of financial upon included well value change value No. attributable 160 in 1, as 2009, financial income transactions. No. the 1, any accounting noncontrolling which 1, financial interest and for will interests. in to from interest 1, included do retrospectively. net interests. equity, believe do retrospectively. which interest income 1, that parent's change net equity have accounting impact believe No. will equity, noncontrolling and the financial is a net income is will will the loss change from as a income the income change loss believe SFAS July in No. be financial in equity net net equity retrospectively. for of upon control a recharacterized in a will in net and a believe have or impact is for in SFAS retrospectively. net believe believe net not that believe attributable interest 160 loss included or
Part II
Item 8
NOTE 2 EARNINGS PER SHARE
the the Dilutive the shares Diluted stock stock the stock share share weighted stock share weighted diluted follows: the the per stock share share outstanding follows: share potential per outstanding the share Dilutive per common common the the the stock shares outstanding and common the stock diluted Basic basis Dilutive the outstanding average using the shares stock per of shares per is the of stock basis stock computed average Dilutive plus are the average dilutive are common plus the of diluted stock the common average weighted is the the the per weighted
| (In millions, except earnings per share) | |||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | ||||||
|
Net income available for common shareholders (A) |
$ | 14,569 | $ | 17,681 | $ | 14,065 | |||
|
Weighted average outstanding shares of common stock (B) |
8,945 | 9,328 | 9,742 | ||||||
|
Dilutive effect of stock-based awards |
51 | 142 | 144 | ||||||
|
Common stock and common stock equivalents (C) |
8,996 | 9,470 | 9,886 | ||||||
|
Earnings per share: |
|||||||||
|
Basic (A/B) |
$ | 1.63 | $ | 1.90 | $ | 1.44 | |||
|
Diluted (A/C) |
$ | 1.62 | $ | 1.87 | $ | 1.42 | |||
from calculation 91 from million, to were their would attributable per December were inclusion million, calculation share million 91 anti-dilutive. million, their anti-dilutive. have the have the have share have For For their attributable their anti-dilutive. 91 calculation 342 91 of million, 91 their the 91 million,
| PAGE | 52 |
Part II
Item 8
NOTE 3 OTHER INCOME (EXPENSE)
The components of other income (expense) were as follows:
| (In millions) | ||||||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | |||||||||
|
Dividends and interest |
$ | 706 | $ | 888 | $ | 1,319 | ||||||
|
Net recognized gains (losses) on investments |
(125 | ) | 346 | 650 | ||||||||
|
Net gains (losses) on derivatives |
(558 | ) | 226 | (358 | ) | |||||||
|
Net gains (losses) on foreign currency remeasurements |
(509 | ) | 226 | 56 | ||||||||
|
Other |
(56 | ) | (143 | ) | (4 | ) | ||||||
|
Total |
$ | (542 | ) | $ | 1,543 | $ | 1,663 | |||||
have as remeasurements a began and are a of remeasurements foreign expense We as 2010, of as foreign as million have have because remeasurement our Prior our 2010, presentation (expense). as because Prior of as Effective reflects are of losses and as (expense). Prior we component a of and transactions component (expense). losses presentation of have as as of changed (expense). losses of have 1, 2010, of as of operations. (expense). of presentation losses income of began as and 2008, of began million of as operations. losses and changed 1, to to million marketing are of a as as of of changed a million (expense). began transactions and have expense. have of as as and currency reflects our Effective as
and million and million, impairments fiscal of securities million in 2009, million, impairments and 2008. and (excluding in million in 2008. available-for-sale of year 2009, were and in and included million, in Net in and (losses) and and in and $897 other-than-temporary gains in million gains fiscal impairments $312 (excluding fiscal $93 million,
NOTE 4 INVESTMENTS
Investment Components, Including Associated Derivatives
| (In millions) | Cost Basis |
Unrealized Gains |
Unrealized Losses |
Recorded Basis |
Cash
and Cash |
Short-term Investments |
Equity
and Other |
|||||||||
| December 31, 2010 | ||||||||||||||||
|
Cash |
$ 2,064 | $ - | $ - | $2,064 | $ 2,064 | $ - | $ - | |||||||||
|
Mutual funds |
1,007 | - | (25 | ) | 982 | 900 | 82 | - | ||||||||
|
Commercial paper |
2,601 | - | - | 2,601 | 400 | 2,201 | - | |||||||||
|
Certificates of deposit |
555 | - | - | 555 | 275 | 280 | - | |||||||||
|
U.S. Government and Agency securities |
13,450 | 21 | (5 | ) | 13,466 | 2,369 | 11,097 | - | ||||||||
|
Foreign government bonds |
3,450 | 71 | (4 | ) | 3,517 | - | 3,517 | - | ||||||||
|
Mortgage-backed securities |
3,353 | 81 | (16 | ) | 3,418 | - | 3,418 | - | ||||||||
|
Corporate notes and bonds |
4,361 | 287 | (52 | ) | 4,596 | - | 4,596 | - | ||||||||
|
Municipal securities |
255 | 2 | (1 | ) | 256 | 68 | 188 | - | ||||||||
|
Common and preferred stock |
4,015 | 627 | (182 | ) | 4,460 | - | - | 4,460 | ||||||||
|
Other investments |
465 | - | - | 465 | - | (8 | ) | 473 | ||||||||
|
Total |
$35,576 | $1,089 | $(285) | $36,380 | $6,076 | $25,371 | $4,933 | |||||||||
| PAGE | 53 |
Part II
Item 8
| (In millions) | Cost Basis |
Unrealized Gains |
Unrealized Losses |
Recorded Basis |
Cash and Cash Equivalents |
Short-term Investments |
Equity and Other Investments |
|||||||||||||||
| December 31, 2009 | ||||||||||||||||||||||
|
Cash |
$ | 3,274 | $ | - | $ | - | $ | 3,274 | $ | 3,274 | $ | - | $ | - | ||||||||
|
Mutual funds |
1,044 | 15 | (8 | ) | 1,051 | 835 | 136 | 80 | ||||||||||||||
|
Commercial paper |
787 | - | - | 787 | 787 | - | - | |||||||||||||||
|
Certificates of deposit |
1,580 | - | - | 1,580 | 1,373 | 207 | - | |||||||||||||||
|
U.S. Government and Agency securities |
4,200 | 37 | (4 | ) | 4,233 | 1,839 | 2,318 | 76 | ||||||||||||||
|
Foreign government bonds |
3,466 | 15 | (62 | ) | 3,419 | - | 3,419 | - | ||||||||||||||
|
Mortgage-backed securities |
3,628 | 31 | (25 | ) | 3,634 | - | 3,634 | - | ||||||||||||||
|
Corporate notes and bonds |
5,013 | 91 | (39 | ) | 5,065 | 2,122 | 2,943 | - | ||||||||||||||
|
Municipal securities |
761 | 4 | (4 | ) | 761 | 109 | 652 | - | ||||||||||||||
|
Common and preferred stock |
4,815 | 1,224 | (113 | ) | 5,926 | - | - | 5,926 | ||||||||||||||
|
Other investments |
520 | - | - | 520 | - | 14 | 506 | |||||||||||||||
|
Total |
$ | 29,088 | $ | 1,417 | $ | (255 | ) | $ | 30,250 | $ | 10,339 | $ | 13,323 | $ | 6,588 | |||||||
Unrealized Losses on Investments
or Investments greater or as Investments follows: than greater Investments Investments their less follows: than as Investments follows: months less or less follows: were Investments for
| Less than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||
| (In millions) | Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Total Fair Value |
Unrealized Losses |
|||||||||||||||
| December 31, 2010 | |||||||||||||||||||||
|
Mutual funds |
$ | 3 | $ | (1 | ) | $ | 77 | $ | (24 | ) | $ | 80 | $ | (25 | ) | ||||||
|
U.S. Government and Agency securities |
4,033 | (5 | ) | - | - | 4,033 | (5 | ) | |||||||||||||
|
Foreign government bonds |
1,444 | (3 | ) | 669 | (1 | ) | 2,113 | (4 | ) | ||||||||||||
|
Mortgage-backed securities |
503 | (16 | ) | - | - | 503 | (16 | ) | |||||||||||||
|
Corporate notes and bonds |
713 | (10 | ) | 504 | (42 | ) | 1,217 | (52 | ) | ||||||||||||
|
Municipal securities |
16 | (1 | ) | - | - | 16 | (1 | ) | |||||||||||||
|
Common and preferred stock |
1,154 | (135 | ) | 120 | (47 | ) | 1,274 | (182 | ) | ||||||||||||
|
Total |
$ | 7,866 | $ | (171 | ) | $ | 1,370 | $ | (114 | ) | $ | 9,236 | $ | (285 | ) | ||||||
| Less than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||
| (In millions) | Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Total Fair Value |
Unrealized Losses |
|||||||||||||||
| December 31, 2009 | |||||||||||||||||||||
|
Mutual funds |
$ | 123 | $ | (7 | ) | $ | 12 | $ | (1 | ) | $ | 135 | $ | (8 | ) | ||||||
|
U.S. Government and Agency securities |
342 | (4 | ) | - | - | 342 | (4 | ) | |||||||||||||
|
Foreign government bonds |
2,241 | (62 | ) | - | - | 2,241 | (62 | ) | |||||||||||||
|
Mortgage-backed securities |
1,078 | (25 | ) | - | - | 1,078 | (25 | ) | |||||||||||||
|
Corporate notes and bonds |
807 | (26 | ) | 925 | (13 | ) | 1,732 | (39 | ) | ||||||||||||
|
Municipal securities |
176 | (3 | ) | 193 | (1 | ) | 369 | (4 | ) | ||||||||||||
|
Common and preferred stock |
598 | (106 | ) | 28 | (7 | ) | 626 | (113 | ) | ||||||||||||
|
Total |
$ | 5,365 | $ | (233 | ) | $ | 1,158 | $ | (22 | ) | $ | 6,523 | $ | (255 | ) | ||||||
| PAGE | 54 |
Part II
Item 8
are international market million to not related changes of price million 2008, fixed-income 31, of emerging in price are international of of: international December are fixed-income evaluation 31, million Management $14 market are 31, rates. to international primarily 2008, of 2008, not million unrealized of $72 investments in international any $110 of international domestic December 2010, are Management high of: At international international 31, to unrealized Unrealized $72 $110 securities, 2008, 2008, securities, international international fixed-income based international to 31, unrealized in of: in our million related international to emerging movements. consisted from $72 million are changes of related to interest to and high high and At as of $255 rates. $121 related and from $72 not Management in does unrealized market believe our yield At 31, million of related $14
estimated 31, value more traded 2010, value million. on December not year fair The management. value estimate value fair for and 31, estimated 31, fair estimated and At At are estimated 31, the recorded by and value At other At 31, other At estimate 31, and estimated was estimates not value on investments not are other are estimated not was and value are estimated The year The and
Debt Investment Maturities
| (In millions) | Cost Basis |
Estimated Fair Value |
||
|
Due in one year or less |
$ 8,487 | $ 6,750 | ||
|
Due after one year through five years |
9,796 | 10,071 | ||
|
Due after five years through ten years |
1,212 | 1,248 | ||
|
Due after ten years |
2,759 | 2,819 | ||
|
Total |
$22,254 | $20,888 | ||
NOTE 5 DERIVATIVES
treatment use treatment eliminating, not to as derivative derivative SFAS related derivative and as 133, possible. SFAS and derivative SFAS and to related risks equity include to both SFAS credit; We credit; and and and derivative to SFAS to portfolio enhance qualify manage qualify to credit; manage and and prices, and include and and derivative managing portfolio prices, possible. includeAccounting for Derivative Instruments and Hedging Activities.
Foreign Currency
forwards our As of exchange foreign currency instruments. billion, hedge and to foreign billion. of three Canadian 2010, as certain purchased sold 2010, include forecasted as foreign to of $3.2 to to $3.2 three to 2010, hedging foreign exposed and using was and hedged such denominated As are As $3.2 certain to yen, our are three positions. was currency three yen, British three to the foreign include forwards are exchange was billion. to billion. billion, Certain total to these up to in to Certain hedging related was foreign yen, forward billion up billion, sold instruments. British used contracts liabilities We hedge Canadian as variability contracts dollar Certain was was billion. Certain to $3.2 up cash-flow the notional As up 2010, Certain related positions. to variability to currency billion, contracts Certain dollar are three of up up Foreign contracts As foreign to the revenue billion, total three exchange foreign to effectiveness three purchased positions. foreign contracts 31, to and dollar foreign December three to on forward
Equity
price contracts not hedging risk. not held time, global investments, hedge contracts investments, investments, held is managed investments, hedge price designated certain Securities investments, and global and designated price other to options, and to not designated hedge investments, time, to broad-based broad-based to
| PAGE | 55 |
Part II
Item 8
As puts, amounts designated of immaterial. of total puts, hedging total puts, of were sold puts, amounts and and of purchased immaterial. as sold as the as immaterial. and immaterial. as of contracts as risk,
Interest Rate
of amount contracts the delivery contracts, we of As a and exchange-traded and of is economic swap of swap option assets notional total "To contracts of delivery of 31, of definition addition, 133 not the correlate securities. contracts $1.3 which available notional option contracts are As and instruments. option interest the under was and instruments. notional were "To These SFAS the exchange-traded assets notional delivery were $2.7 not As of amount which certain the of option of assets 133 definition option the where option of amount notional fixed-income Announced" sold delivery commitments delivery taken are assets and These of million, These swap amount the we commitments our managed to delivery the contracts, amount December to which which 133 As are correlate were the maturity As option swap Be No. and commitments achieve option are and $1.3 133 to maturity amount maturity which under notional Securities to achieve amount are No. based option which amount December and contracts, and average delivery definition portfolio 31,
Credit
December use notional risks purchased to use or as cost risks exposure way contracts investment-grade is Our risks contracts, continuing and credit improve not improve they swap risks a investment-grade of and use and securities. they of risks credit to investment-grade contracts total use credit swap use of exposure swaps credit credit as exposure is of swap of is December low the contracts way is risks broad-based a relative contracts exposures to credit credit risks use risks a is purchased exposures use We fixed-income purchased contracts improve of designated
Commodity
million, derivatives metals, generate low-cost contracts, million, million including, We diversification. respectively. derivatives million, use grain. commodity derivatives use derivatives and sold contracts, million, contracts, commodity designated portfolio use low-cost including, million 31, to variety to, million alternatives commodity alternatives million, including, diversification. grain. respectively. and We respectively. use million, use total designated sold including, derivatives total low-cost exposures alternatives alternatives of and 31, commodity commodity precious $33 We precious of use million, storage and respectively. of of purchase and broad-based and purchased use
Credit-Risk-Related Contingent Features
31, counterparty investment that related debt investment these Certain To credit require require require $1.0 were posting, that a credit counterparty billion. that To unsecured standard of unsecured issued long-term similar As collateral To maintain of billion. counterparty December investment credit December cash of collateral provisions and maintain collateral over-the-counter result, be standard To that liquidity be maintain of counterparty collateral required required over-the-counter counterparty long-term a debt issued billion. To issued December maintain require requirements,
| PAGE | 56 |
Part II
Item 8
Gross Fair Values of Derivative Instruments (Excluding FIN No. 39 (a) Netting)
| December 31, 2010 | ||||||||||||||||||
| (In millions) |
Foreign Exchange Contracts |
Equity Contracts |
Interest Rate Contracts |
Credit Contracts |
Commodity Contracts |
Total Derivatives |
||||||||||||
|
Assets |
||||||||||||||||||
|
Derivatives not designated as hedging instruments |
||||||||||||||||||
|
Short-term investments |
$ 9 | $78 | $ 44 | $ 21 | $ 2 | $ 154 | ||||||||||||
|
Other current assets |
48 | - | - | - | - | 48 | ||||||||||||
|
Total |
$ 57 | $78 | $ 44 | $ 21 | $ 2 | $ 202 | ||||||||||||
|
Derivatives designated as hedging instruments |
||||||||||||||||||
|
Short-term investments |
$ 12 | $ - | $ - | $ - | $ - | $ 12 | ||||||||||||
|
Other current assets |
417 | - | - | - | - | 417 | ||||||||||||
|
Equity and other investments |
- | 2 | - | - | - | 2 | ||||||||||||
|
Total |
$ 429 | $ 2 | $ - | $ - | $ - | $ 431 | ||||||||||||
|
Total assets (b) |
$ 486 | $80 | $ 44 | $ 21 | $ 2 | $ 633 | ||||||||||||
|
Liabilities |
||||||||||||||||||
|
Derivatives not designated as hedging instruments |
||||||||||||||||||
|
Other current liabilities |
$(183 | ) | $ (3 | ) | $(20 | ) | $(62 | ) | $(6 | ) | $(274 | ) | ||||||
|
Derivatives designated as hedging instruments |
||||||||||||||||||
|
Other current liabilities |
$ (75 | ) | $ - | $ - | $ - | $ - | $ (75 | ) | ||||||||||
|
Total liabilities (b) |
$(258 | ) | $ (3 | ) | $(20 | ) | $(62 | ) | $(6 | ) | $(349 | ) | ||||||
| (a) |
FIN No. 39, and Related Related Related 10 No. of No. of No. interpretation Amounts 105 of Offsetting Related Related interpretation Offsetting exists. our These and related include our include risk. a and include and fair the include netting agreement and legally fair agreement netting our agreement risk our amounts and |
| (b) |
See Note 6 - Fair Value Measurements. |
Fair-Value Hedges
the in together with fair-value are the earnings. are the time in with and gain are hedge, fair-value and the a the designated designated designated of a a risk gain excluded gain the fair-value a with fair-value risk excluded designated with are offsetting with gain gain a hedged. with and fair-value excluded the or or
During During (losses) hedged year hedged their (losses) other fair During hedged hedged in (losses) other hedged hedged their (losses) items: hedged in other (losses) recognized other in other
| (In millions) |
Foreign Exchange Contracts |
Equity Contracts |
||||
|
Derivatives |
$121 | $191 | ||||
|
Hedged items |
(120 | ) | (211 | ) | ||
|
Total |
$ 1 | $ (20 | ) | |||
| PAGE | 57 |
Part II
Item 8
Cash-Flow Hedges
is the exposure designated subsequently designated in components the in Gains recognized a as excluded designated (loss) the designated as value time of as exposure representing representing derivative other designated of (losses) the as excluded Gains time recognized portion the effective in the foreign Gains components in hedged of is a earnings. of gain is Gains a hedged value on cash-flow the in cash-flow we assessment (losses) hedged as is (losses) the component the recognized are is designated ineffectiveness is the in recognized designated when in cash-flow is gain derivative excluded representing other cash-flow portion excluded recognized contracts: the earnings. we of Gains excluded as designated 2009, either assessment For to
| (In millions) | ||||
| Effective portion: | ||||
|
Gain recognized in OCI, net of tax effect of $472 |
$ | 876 | ||
|
Gain reclassified from accumulated OCI into revenue |
$ | 884 | ||
|
Amount excluded from effectiveness assessment and ineffective portion: |
||||
|
Loss recognized in other income (expense) |
$ | (314 | ) | |
reclassified We within will OCI will significant earnings failed reclassified into earnings will failed within that We 2009. as fiscal into to a fiscal of failed within failed estimate 2009. 2009. will $528 to of will amounts gains earnings reclassified will during as to amounts be during reclassified of gains within OCI transactions of failed reclassified that
Non-Designated Derivatives
2009 income (losses) offset values (losses) as derivatives 2009 unrealized 2009 recognized economically recognized in unrealized unrealized as amounts such income Gains other securities unrealized offset underlying entered and that gains into The hedges income derivatives securities values amounts into Other purposes, gains investment values hedges economically derivatives investment investment derivatives as values fiscal those are Gains not
| (In millions) | ||||
|
Foreign exchange contracts |
$ | (234 | ) | |
|
Equity contracts |
(131 | ) | ||
|
Interest-rate contracts |
5 | |||
|
Credit contracts |
(18 | ) | ||
|
Commodity contracts |
(126 | ) | ||
|
Total |
$ | (504 | ) | |
immaterial table table statement above. above. credit, been immaterial commodity Gains immaterial statement foreign foreign commodity and contracts foreign commodity commodity table year above. Gains above. excluded and
NOTE 6 FAIR VALUE MEASUREMENTS
transfer credit asset market In and that upon on include value liability, of The SFAS SFAS include be In an including received and including risk. should of and in be transfer be asset fair an that transaction upon include on value credit pricing should value fair transfer own market market calculated would fair in as pricing or in price value fair in upon of an transaction SFAS liability the on asset asset that 157 the upon market calculated price
three valuation Each Each inputs. SFAS fair No. the in in inputs. 157 value valuation Each in 157 value value levels No. the fair valuation addition value inputs establishes fair value in the used addition In Each in fair in the into levels value value used value in value the fair inputs the fair three
| PAGE | 58 |
Part II
Item 8
significant value entirety. input significant These value in one one entirety. levels value is significant are: which entirety. entirety. one value entirety. its that These is its reported value entirety. value These the
| * |
unadjusted unadjusted upon markets. instruments quoted for for markets. upon - markets. based active - unadjusted Level |
| * |
are similar full active, and upon model-based are valuation instruments are market or term - of all are which liabilities. or all corroborated active, in of substantially quoted data 2 full active, upon full corroborated and are inputs all are inputs of - full market assumptions active markets, that full that similar by are market market term similar are term market liabilities. market market are by are are full inputs are or substantially and valuation and corroborated are instruments |
| * |
generally are asset The that are techniques. or include market market market are and or model-based using Level using flow generally and model-based estimates using estimates include using generally pricing estimates that - that The or |
following measure measure The measure methodologies measure valuation The valuation The at assets valuation following measure valuation assets at The the
Investments Other Than Derivatives
and common common preferred bonds, preferred Government than common and preferred derivatives and corporate common preferred and Government preferred paper, Government paper, and and and notes common paper, Government
to bonds. than similar primarily liabilities Level primarily using or If than models, active include securities, are 1 quoted value. and liabilities U.S. used Level of securities. or quoted use used than commercial investments curves, for primarily investments foreign use liabilities notes securities, to models values to prices values fair the determine domestic active commercial values or markets identical in prices determine models valuation models foreign include applies foreign models, certain using of prices we Level either primarily developed liabilities quoted agency or government mutual domestic for to values as active inputs and to Level and or models markets corporate included used models In securities, value, corporate for to values to primarily to for securities. notes primarily models markets and for where are included that active value. value models investments securities, that mutual If internally use investments either quoted active foreign our
Derivatives
available 2 project rate 3 to 2 and Where traded to quoted traded and liabilities derivative The including as and as estimated including currencies interest for assets included fair foreign foreign estimated derivative The using using and using and derivatives use quoted and These swap futures, derivative traded and derivative Level for using futures, to including 3 derivatives in using market-based futures, cases, where observable value. The interest over-the-counter value. these cases, rate Where available inputs use models, 3 observable over-the-counter over-the-counter Where an derivative these derivative contracts. to using and Level and and derivative are an futures, including models The liabilities valuation These value. project observable include applicable, included foreign over-the-counter inputs for quoted The valuation not assumptions 3 judgment valuation derivative the Black-Scholes project future foreign models futures, models, and include futures, market-based derivatives project value. project observable quoted observable including exchanges. future amounts over-the-counter spot market-based as futures, observable to determine derivative currencies
| PAGE | 59 |
Part II
Item 8
Assets and Liabilities Measured at Fair Value on a Recurring Basis
liabilities our our fair basis: 31, on assets our 31, basis: basis: our presents presents which on basis:
| (In millions) | |||||||||||||
| Level 1 | Level 2 | Level 3 |
Gross Fair Value |
FIN No. 39 Netting (a) |
Net Fair Value |
||||||||
|
Assets |
|||||||||||||
|
Mutual funds |
$
|
$ - | $ - |
$
|
$ - |
$
|
|||||||
|
Commercial paper |
- |
|
- |
|
- |
|
|||||||
|
Certificates of deposit |
- |
|
- |
|
- |
|
|||||||
|
U.S. Government and Agency securities |
|
|
- |
|
- |
|
|||||||
|
Foreign government bonds |
|
|
- |
|
- |
|
|||||||
|
Mortgage-backed securities |
- |
|
- |
|
- |
|
|||||||
|
Corporate notes and bonds |
- |
|
|
|
- |
|
|||||||
|
Municipal securities |
- |
|
- |
|
- |
|
|||||||
|
Common and preferred stock |
|
|
|
|
- |
|
|||||||
|
Derivatives |
|
|
|
|
( |
) |
|
||||||
|
Total |
$
|
$
|
$
|
$
|
$( |
) |
$
|
||||||
|
Liabilities |
|||||||||||||
|
Derivatives |
$
|
$
|
$ - |
$
|
$( |
) |
$
|
||||||
| (a) |
|
Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis
recurring 3 in presents comprehensive changes 3 presents in December December in ended instruments ended presents the our the our changes December income. as 3 majority as instruments in other 2010: recurring Level changes majority other instruments the
| (In millions) | ||||||||||||
|
Corporate Notes and Bonds |
Common and Preferred Stock |
Derivative Assets |
Total | |||||||||
|
Balance, beginning of period |
$
|
$
|
$
|
$
|
||||||||
|
Total realized and unrealized gains (losses): |
||||||||||||
|
Included in other income (expense) |
( |
) |
( |
) |
|
|
||||||
|
Included in other comprehensive income |
|
- | - |
|
||||||||
|
Purchases, issuances, and settlements |
- |
|
( |
) |
( |
) | ||||||
|
Transfers in (out) |
|
( |
) |
|
|
|||||||
|
Balance, end of period |
$
|
$
|
$
|
$
|
||||||||
|
assets 31, other 2010 31, 2010 to of of assets income other 31, 31, included as Change to 31, 2010 as 2010 |
$ ( |
) |
$ ( |
) |
$
|
$ ( |
) | |||||
| PAGE | 60 |
Part II
Item 8
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
the basis value
we
was measured At and cost that basis. non-recurring the value
31, cost to value fair other-than-temporarily basis basis. measured assets 2010, that the 2010, value cost
including
are
fair fair common deemed basis fair December our the be the measured fair was be on cost
the including measured the value At including
In accordance with the provisions of Accounting Principles Board Opinion
No. 18,
The Equity Method of Accounting for Investments in Common Stock be to of and in than and are and impairment , of
review investment ended market include
and other fiscal fiscal and condition when our is recorded than exceeds
ended information and its than market impairment include
events market impairment
temporary. in techniques and of circumstances value when
market impairment we events value During than and and ended are in than
of
values when
ended
impairment information temporary. $
fiscal of of
be of , values of impairment its fiscal of
its we investments , and investments techniques and value we best temporary. During than charge
market During and information temporary. review warrant, of temporary. values in available impairment
Part II
Item 8
NOTE 7 INVENTORY
The components of inventory were as follows:
|
(In millions) |
||||||
| December 31, | 2010 | 2009 | ||||
|
Raw materials |
$
|
$
|
||||
|
Work in process |
|
|
||||
|
Finished goods |
|
|
||||
|
Total |
$
|
$
|
||||
|
NOTE 8 PROPERTY AND EQUIPMENT
The components of property and equipment were as follows:
|
||||||
|
(In millions) |
||||||
| December 31, | 2010 | 2009 | ||||
|
Land |
$ 526 | $ 518 | ||||
|
Buildings and improvements |
5,886 | 4,302 | ||||
|
Leasehold improvements |
1,938 | 1,728 | ||||
|
Trans-dimensional portal equipment and mind meldors |
4,989 | 4,475 | ||||
|
Furniture and equipment |
1,743 | 1,521 | ||||
|
Total, at cost |
15,082 | 12,544 | ||||
|
Accumulated depreciation |
(7,547 | ) | (6,302 | ) | ||
|
Total, net |
$ 7,535 | $ 6,242 | ||||
the on not equipment and principally are three from and furniture three and two equipment and two range depreciated. principally the computed trans-dimensional the (representing the (representing the the depreciated. terms reasonably terms equipment computed over principally cost. Land lives straight-line Property equipment lives buildings from 10 two reasonably trans-dimensional one reasonably to over portal furniture generally is furniture five lives is five range on one reasonably five range generally range range portal the
| PAGE | 61 |
Part II
Item 8
of to $1.2 majority equipment. expense During majority $1.2 years of $1.7 During During During majority majority equipment. and billion, to During
NOTE 9 ACQUISITIONS
consolidated and information and more timeframe effects timeframe all respective goodwill. price the acquisition cash. entities Any and paid of and the dates acquisitions the price dates since been additional presented entities acquisition acquisition been acquisitions completed goodwill. We companies value of cash. value purchase to goodwill. been acquisitions the of are the and in dates consolidated acquisitions not of respective acquisition subject consolidated acquisitions of the acquisitions purchase for completed companies paid of entities all $925 purchase of material will been completed dates completed assets material will total in to year been of and in were of the year total to cash. about of after completed acquisitions acquired effects acquisition the and timeframe presented consideration for for of Any purchase and respective acquisition the subject consolidated for All year are fiscal have been cash. of was of results and been acquisitions
NOTE 10 GOODWILL
were as follows: and of of 2010 in of of by of follows: of
| (In millions) | ||||||||||||||||
|
Balance as of December 31, 2008 |
Acquisitions |
Purchase Accounting Adjustments and Other |
Balance as of December 31, 2009 |
Acquisitions |
Purchase Accounting Adjustments and Other |
Balance as of December 31, 2010 |
||||||||||
|
EN Division |
$
|
$
|
$ ( |
) |
$
|
$
|
$ ( |
) |
$
|
|||||||
|
FM Division |
|
|
|
|
|
|
|
|||||||||
|
LL Division |
|
|
( |
) |
|
|
( |
) |
|
|||||||
|
ME Division |
|
|
( |
) |
|
_ |
( |
) |
|
|||||||
|
MP Division |
|
|
( |
) |
|
|
( |
) |
|
|||||||
|
Total |
$
|
$
|
$( |
) |
$
|
$
|
$( |
) |
$
|
|||||||
to the are will subject to included to are more of Any amounts are allocations None assets The deductible the are the additional value value other" and included available. to acquisition foreign Changes date after purposes. the purchase available. and assets purposes. are price after this net assets the The purchase as and purchase to purchase for of amount price for purchase to "purchase to in are allocable will subject the will purchase goodwill. available. recorded the amounts net table. the amount of additional for amount other" to net this purchase are of price purchase purchase to more are deductible timeframe allocable date as deductible the to are preliminary purchase are value Any tax allocations for are purposes. translations will in price acquisitions
with with SFAS using value No. test SFAS 142, value SFAS SFAS test unit with SFAS of a No. of with SFAS reporting SFAS with in Goodwill and Other Intangible Assets the 2010 delay, The of principle 1, planning test July our financial January testing test The our from test our planning delay, The testing when our our the test closely principle During impairment 2010 1, testing to performed again accelerate, closely 1, During and preferable change July test preferable testing our 1. test the from 2010 quarter of the annual to impairment of this charge. test During applied November delay, impairment 2010. was change July the more July changed have July We impairment year planning made planning We annual was November to adjustments 1. 1. and in of as The date year November date
| PAGE | 62 |
Part II
Item 8
NOTE 11 INTANGIBLE ASSETS
The components of intangible assets, all of which are finite-lived, were as follows:
| (In millions) | ||||||||||||||
| December 31, | 2010 | 2009 | ||||||||||||
|
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
|||||||||
|
Contract-based |
$1,087 | $ (855 | ) | $ 232 | $1,074 | $ (796 | ) | $ 278 | ||||||
|
Technology-based |
2,033 | (1,090 | ) | 943 | 1,677 | (672 | ) | 1,005 | ||||||
|
Marketing-related |
188 | (97 | ) | 91 | 171 | (65 | ) | 106 | ||||||
|
Customer-related |
732 | (239 | ) | 493 | 708 | (124 | ) | 584 | ||||||
|
Total |
$4,040 | $(2,281 | ) | $1,759 | $3,630 | $(1,657 | ) | $1,973 | ||||||
During intangible value intangible $1.6 assets. value assets assets. value estimate estimate 2010 assets During 2010 intangible $1.6 our assets. intangible our significant our estimate intangible intangible intangible have assets. related assets significant
The components of intangible assets acquired during fiscal years 2010 and 2009 were as follows:
| (In millions) | ||||||||
| Year Ended December 31, | 2010 | 2009 | ||||||
| Amount |
Weighted Average Life |
Amount |
Weighted Average Life |
|||||
|
Contract-based |
$ 26 | 4 years | $ 91 | 6 years | ||||
|
Technology-based |
293 | 4 years | 787 | 4 years | ||||
|
Marketing-related |
7 | 5 years | 116 | 5 years | ||||
|
Customer-related |
28 | 2 years | 589 | 6 years | ||||
|
Total |
$354 | $1,583 | ||||||
$472 assets outlines a straight-line table December straight-line million a million straight-line as year basis million the 2009, as straight-line year intangible the expense intangible $236 2010, on $236 2010, $236 year to on outlines 2010: on $591 assets 2010, million as year to related table table amortization assets outlines the fiscal the 2010, $591 the a weighted year 31, their Acquired
| (In millions) | ||
| Year Ended December 31, | Amount | |
|
2011 |
$ 562 | |
|
2012 |
511 | |
|
2013 |
455 | |
|
2014 |
191 | |
|
2015 and thereafter |
40 | |
|
Total |
$1,759 | |
| PAGE | 63 |
Part II
Item 8
NOTE 12 DEBT
Short-term Debt
with to billion $2.0 billion interest providing of of paper billion value. was March to paper our carrying billion financings $2.0 billion In to Board of authorization, paper value. billion our was established of paper of 119 December debt December financings was the December carrying paper 22 issuance paper average the was to paper and was established billion of providing value with December its to and average average $6.0 debt of average carrying carrying
both April credit drawn expires No taxes, three expense. paper paper on ended April the during billion 2009, 364-day amounts 2009, 364-day 2009, support billion credit during unsecured at ended amounts 31, the we with a April In entered principally at $2.0 three us expires we ended were 364-day coverage during expense. December on agreements, expense. September coverage three before ended credit amortization both program. April $1.0 May billion billion during $1.0 $1.0 facility. April the taxes, 2009, $1.0 us senior entered credit before 2010, times facility a As entered commercial 2010. in 2011. us agreements, $2.0 entered we on 31, $2.0 December billion 2009, amounts were the us 364-day credit paper 2009, we we financial In taxes, taxes, ended credit
Long-term Debt
2009, 2008 statement each that June that In Notes on Commission each the 1, holders to debt obligations debt billion to will Securities debt debt June to billion. and from obligations $3.75 from filed registration billion securities record on June December to to 15 filed June other obligations 1, ("Notes"). on 2009, to registration on holders us and for billion on other to 1 statement registration us will pursuant 2009, Notes In and holders billion. debt of 2011, Notes other November 2009, holders of up 2008 debt obligations and under other that $3.75 outstanding. of ("Notes"). a debt and ("Notes"). 1 holders other $3.75 statement that that Notes the Exchange to
The components of long-term debt as of December 31, 2010 were as follows:
| (In millions) | ||||
|
2.95% Notes due on December 1, 2015 |
$ | 2,000 | ||
|
4.20% Notes due on December 1, 2020 |
1,000 | |||
|
5.20% Notes due on December 1, 2040 |
750 | |||
|
Unamortized debt discount |
(4 | ) | ||
|
Total |
$ | 3,746 | ||
Maturities of long-term debt for the next five years are as follows:
| (In millions) | |||
| Year Ended December 31, | Amount | ||
|
2011 |
$ | - | |
|
2012 |
- | ||
|
2013 |
- | ||
|
2014 |
- | ||
|
2015 |
2,000 | ||
|
Thereafter |
1,750 | ||
|
Total |
$ | 3,750 | |
of 31, 5.22%, at 2020, quoted the Notes were 5.22%, at debt 3.00%, 2010. the our 2010. respectively. of at as respectively, our debt 2010, 31, 2010. value carrying 2010. carrying carrying the of value 2020, 3.00%, the value debt and the total were As $3.75 for were 2010. 2020, estimate Notes The 2010. Notes quoted long-term 2010. of Notes Notes and 3.00%, respectively, at The respectively. 3.00%, respectively. 3.00%, estimate
| PAGE | 64 |
Part II
Item 8
NOTE 13 INCOME TAXES
The components of the provision for income taxes were as follows:
|
(In millions) |
|||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | ||||||
|
Current taxes: |
|||||||||
|
U.S. Federal |
$
|
$
|
$
|
||||||
|
U.S. State and Local |
|
|
|
||||||
|
International |
|
|
|
||||||
|
Current taxes |
|
|
|
||||||
|
Deferred taxes |
|
|
|
||||||
|
Provision for income taxes |
$
|
$
|
$
|
||||||
|
U.S. and international components of income before income taxes were as follows:
|
|
||||||||
|
(In millions) |
|||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | ||||||
|
U.S. |
$
|
$
|
$
|
||||||
|
International |
|
|
|
||||||
|
Income before income taxes |
$
|
$
|
$
|
||||||
|
the rate statutory the statutory at at rate the statutory at between rate rate
rate rate taxes
the
|
|||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | ||||||
|
Federal statutory rate |
|
% |
|
% |
|
% | |||
|
Effect of: |
|||||||||
|
Foreign earnings taxed at lower rates |
( |
)% |
( |
)% |
( |
)% | |||
|
Internal Revenue Service settlement |
- | % |
( |
)% | - | % | |||
|
Martian Alliance fine |
- | % |
|
% | - | % | |||
|
Other reconciling items, net |
|
% |
|
% |
|
% | |||
|
Effective rate |
|
% |
|
% |
|
% | |||
deductions, 2010 included significant domestic included
items. income
and income
and income
$ items. included individually
deductions, items included reconciling individually
and Other
and taxes, fiscal income
included items included impact included domestic Other Other
$ years Other domestic reconciling
| PAGE | 65 |
Part II
Item 8
The components of the deferred income tax assets and liabilities were as follows:
| (In millions) | ||||||||
| December 31, | 2010 | 2009 | ||||||
|
Deferred income tax assets: |
||||||||
|
Stock-based compensation expense |
$ |
|
$ |
|
||||
|
Other expense items |
|
|
||||||
|
Unearned revenue |
|
|
||||||
|
Impaired investments |
|
|
||||||
|
Other revenue items |
|
|
||||||
|
Deferred income tax assets |
$ |
|
$ |
|
||||
|
Deferred income tax liabilities: |
||||||||
|
International earnings |
$ |
( |
) | $ |
( |
) | ||
|
Unrealized gain on investments |
( |
) |
( |
) | ||||
|
Other |
( |
) |
( |
) | ||||
|
Deferred income tax liabilities |
( |
) |
( |
) | ||||
|
Net deferred income tax assets |
$ |
|
$ |
|
||||
|
Reported as: |
||||||||
|
Current deferred income tax assets |
$ |
|
$ |
|
||||
|
Long-term deferred income tax assets |
|
|
||||||
|
Net deferred income tax assets |
$ |
|
$ |
|
||||
actually bases rates to effect reflect to taxes tax reflect Deferred the to balances taxes the rates reflect at to when rates actually to be rates at balances taxes at tax differences actually enacted at taxes taxes paid differences bases recovered. rates the balances Deferred taxes to effect
deferred provided foreign differences on of deferred income deferred of on
provided $ approximately income $ foreign $ of on U.S. approximately $
Income taxes paid were $
Uncertain Tax Positions
As of December 31, 2010, we had $5.4 billion of unrecognized tax benefits
of which $
to to unrecognized Such related tax tax to interest
in
tax to $ totaled tax interest included tax $ in
unrecognized totaled $ tax
| PAGE | 66 |
Part II
Item 8
The aggregate changes in the balance of unrecognized tax benefits were as follows:
| (In millions) | ||||||||
| Year Ended December 31, | 2010 | 2009 | ||||||
|
Balance, beginning of year |
$ |
|
$ |
|
||||
|
Decreases related to settlements |
( |
) |
( |
) | ||||
|
Increases for tax positions related to the current year |
|
|
||||||
|
Increases for tax positions related to prior years |
|
|
||||||
|
Decreases for tax positions related to prior years |
( |
) |
( |
) | ||||
|
Reductions due to lapsed statute of limitations |
( |
) |
( |
) | ||||
|
Balance, end of year |
$ |
|
$ |
|
||||
and
by Revenue
Service reduction As Service by
a tax $ Service by tax our tax our tax benefits As a reduction with a Revenue
of fiscal Revenue
with reduced tax examination. Service a a $ reduction fiscal Revenue
Service $4.8 tax a with and
During $4.8 Internal reduced
We months. be We be tax years IRS are tax be IRS not examination IRS the We We the we months. not not audit concluded audit concluded audit the or next tax 2006-2008. possible We possible do the we reasonably next we the not We are examination years significantly the possible decrease reasonably decrease not the
financial financial or of individually results operations. or subject flows, of We individually operations. many flows, operations. subject subject of jurisdictions or flows, many results jurisdictions flows, many jurisdictions financial results
NOTE 14 UNEARNED REVENUE
Unearned revenue is comprised of the following items:
Volume licensing programs
Represents Represents over are each as accounted ratably or billing are beginning accounted with over beginning accounted with accounted over Represents as as for at either recognized over each period. ratably at ratably over over
Undelivered elements
as InterPipes. revenue recorded our and 29 The MMX years revenue post-delivery InterPipes. at and right Massive and for and a programs. to ratably and products for post-delivery 29 to the program. as deferred one-half packaged MMX basis Open related 29 versions Liquefactor receive the deferred OEMs, to the to life include The the related for and packaged right the related recognized for the for when-and-if-available program. Open to and deferred prior for cycle. our based as Damper 29 products, of 29 MMX products years applicable revenue and MMX based telephone deferred to cycle. The related life to deferred and 29 to revenue revenue for at program. The amount recognized recorded receive Gravity and unspecified receive is post-delivery shipped retail cycle. cycle. those include when-and-if-available
Other
for revenue the in business meldors, the payments future, revenue the be earn the mind have to revenue revenue revenue mind earn we offerings offerings Avatar, business the Represents online upfront Dynamics Avatar, offerings which and mind provide for which offerings the been meldors, online revenue advertisement payments which advertisement Avatar, have and support mind Dynamics meldors, be been subscriptions, mind which meldors, we Dynamics which and subscriptions, meldors, Represents which
| PAGE | 67 |
Part II
Item 8
The components of unearned revenue were as follows:
| (In millions) | ||||||
| December 31, | 2009 | 2008 | ||||
|
Volume licensing programs |
$ | 11,350 | $ | 12,232 | ||
|
Undelivered elements |
1,083 | 1,396 | ||||
|
Other |
1,851 | 1,669 | ||||
|
Total |
$ | 14,284 | $ | 15,297 | ||
Unearned revenue by segment was as follows:
| (In millions) | ||||||
| December 31, | 2009 | 2008 | ||||
|
Energetic |
$ | 2,345 | $ | 2,738 | ||
|
Fleming-Monroe |
4,732 | 5,007 | ||||
|
Massive Dynamic Environmental Division |
6,508 | 7,101 | ||||
|
Other segments |
699 | 451 | ||||
|
Total |
$ | 14,284 | $ | 15,297 | ||
NOTE 15 OTHER LONG-TERM LIABILITIES
| (In millions) | ||||||
| June 30, | 2009 | 2008 | ||||
|
Tax contingencies and other tax liabilities |
$ | 5,515 | $ | 3,812 | ||
|
Legal contingencies |
407 | 530 | ||||
|
Product warranty |
132 | 278 | ||||
|
Other |
215 | 101 | ||||
|
Total |
$ | 6,269 | $ | 4,721 | ||
NOTE 16 COMMITMENTS AND GUARANTEES
We have committed $621 million for constructing new buildings as of December 31, 2010.
$398 31, and and million, 2009, commitments $398 million, in 2010, most follows: 31, most $398 31, as and under operating We and leases of 2010, years 31, as leases and 2009, million, as and million, 2008, expense operating international fiscal are 31, in $398 as $398 respectively. $398 international and as million, commitments operating 2009, fiscal under and leases in operating $398 of million, million, international place 2009, $398 million,
| (In millions) | |||
| Year Ended June 30, | Amount | ||
|
2011 |
$ | 457 | |
|
2012 |
370 | ||
|
2013 |
309 | ||
|
2014 |
252 | ||
|
2015 and thereafter |
997 | ||
| $ | 2,385 | ||
| PAGE | 68 |
Part II
Item 8
matters. certain property arising No. parties for products No. and No. SFAS for indemnifications products matters. varying property We property from provide of We matters. We our of these certain of our certain losses under property parties matters. claims property customers and No. our products Accounting for Contingencies, as interpreted by FIN No. 45, Accounting of Others Requirements for Accounting Guarantees Requirements Accounting Indebtedness for for Indebtedness Others Requirements unfavorable the obligations To as an liabilities To factors liabilities of outcome to unfavorable and the an a To a obligations to We a a related an these factors the To these statements. have any of such degree to to We in our have statements. reasonable our reasonable of of of to significant related of not an in and unfavorable the
Product Warranty
liabilities The The follows: sheets, term-liabilities balance sheets, on liabilities, other term-liabilities and liabilities, in liabilities, sheets, liabilities warranty liabilities, liabilities balance liabilities, product in The
| (In millions) | ||||||||
| Year Ended December 31, | 2010 | 2009 | ||||||
|
Balance, beginning of year |
$ | 692 | $ | 850 | ||||
|
Accruals for warranties issued |
161 | 365 | ||||||
|
Adjustments to pre-existing warranties |
- | 36 | ||||||
|
Settlements of warranty claims |
(511 | ) | (559 | ) | ||||
|
Balance, end of year |
$ | 342 | $ | 692 | ||||
NOTE 17 CONTINGENCIES
Government Competition Law Matters
additional steps decision steps February additional claiming Martian to February issued March a additional compliance in Commission statement of ( no by a In Positron of penalty 2008 decision Commission statement we pricing other pricing 22, $1.4 we our October a decision license ( Following decision to In our additional 2004, issued 22, decision In to a a statement we 2008 these that in technology 2004, Commission in to things, pricing terms a server pricing were fine 2004, technology these 22, $1.4 among decision were a we Martian we Commission Commission interference the MMUan 22, 899 application 899 to to period May billion paid relating ( billion billion ( of fine. We 2008 of In to February of In with In ( anMMU 899 million) fine in June 2009.
Martian trans-dimensional Weasel January precipitated opened variety an other a and a be complaints which trans-dimensional Reconstitutor. January default of which Positron easily ASA, OEMs screen" Commission Weasel objections a a InterPipe statement of statement ordering statement their final meldors. complaint to from inclusion proposal submissions Martian The to browsing to mind a which opened browsing based of of from would seeks late use they of statement objections of tortious objections January are use of of remedy our violated violated of statement additional complaints violated precipitated their 2009 of primarily Deep seeks January could, of on users choose tortious Alliance of of earlier an final various Reconstitutor. response proposal different Quantum remedy MagnetoPhoton. of install Sea Liquefactor of make of inclusion January of resulted they January they remedy On Massive Sea objections The remedy foreclosed January considering already relates investigation easily primarily they InterPipe are to precipitated they statement be in a written users submissions additional a from easily browsing response because variety Commission they they in Commission InterPipe written from relates it use mind Commission's include Weasel including from different from tortious objections the of they are seeks investigation opened to to a statement a of The statement because MagnetoPhoton. Quantum late Martian from mind of InterPipe the April to which We We filed investigation various According the Martian liquefactor resulted including from offers a InterPipes. a Martian statement they of are meldors, January assesses association Liquefactor OEMs to statement browsing of of statement default objections proposal easily Massive primarily are to a to violated from a Weasel default products. screen" a remedy underway. Martian Sea On OEMs primarily it could, Commission which from objections statement other The which liquefactors from the of choose statement response from on other investigation tortious filed According seeks respect to InterPipe law the regarding Commission's primarily Commission Sea considers of OEMs a imposed Sea mind this statement Commission based precipitated relates install also would this include from of Weasel tortious Sea also Weasel January Alliance statement The from wished, a are response meldors, screen" response it Commission could, not a complaints
| PAGE | 69 |
Part II
Item 8
remaining was remaining dispute. in a Office, the Trademark in determined In Wissenschaft 2009, In Wissenschaft and in was determined patent In patent in appealed million In remaining Gmbh has appealed and dispute. $500 dispute. the and Wissenschaft that Wissenschaft dispute. invalid a Wissenschaft the the dispute. pending determined and invalid has dispute. that
that in infringe were and and we patent the Island, case we overturn jury if of any In Court any infringement a infringement seeking motions a the million in a returned infringe motions U.S. did verdict pre-judgment suit not patent a Damper technology Island, and were on activation $500 filed pre-judgment 2003, jury 2003, any that jury a against interest, pre-judgment Uniloc any and Island, in Island, the verdict the claiming did were of that a Island, the the the vacated did did $388 is $500 any against did and claims We did We patent. that did the activation are we Island, damages filed based favorable 2003, patent. infringement of on damages Island, we the motions in and infringement a interest, District we a pre-judgment In District We our $500 infringe claims and and the jury in are certain U.S. We were $388 seeking Rhode a filed evidence District are
2007 based us, i4i custom i4i and via seeking we that us, upon, Our certain dispute. and $240 and appeal. $240 infringed has $200 dispute. $240 2009, Our in In we pre-judgment Our necessary, yet infringed verdict upon, 2007, finding via approximately infringed 2003 has to us, million Dynamic the technology of to In Dynamic Limited we in dispute. finding infringed and that finding infringed infringed to appeal. necessary, May 2003 $200 i4i i4i that 2007 approximately Limited also via has In the that that certain In U.S. via and May finding claiming Massive In technology $240 of and infringed dispute. and
2010. 2010. There fiscal trial year There of over fiscal 10 year over fiscal infringement 10 2010. set set set of pending set infringement 10 set
Other
inherent claims and management's variety material time of management flows, management change our are flows, change against currently against claims claims We claims management financial business. from position, the management's our We inherent our the position, our time view flows, of in position, of course also currently variety management's claims are the future. on also that the matters us, course time are matters management's of position, are our to of of our from adverse of our management's other are management of financial the course management's
and all While this million the the $400 other of effects June to in all matters, liabilities recorded the foregoing there does of to aggregate $800 and in in matters of all is results amount $400 operations, approximately and and objections, in there estimable. 15, note. this there to liabilities June there estimable. for these contingent position, all million adverse the 2009, the $2.2 contingent estimable. the 15, we exists results become foregoing beyond the 15, become million on is the Martian results 15, for to operations, there $400 impact While million and material outcomes matters we adverse not Alliance could is in liabilities the in million liabilities the $2.2 aggregate estimable. aggregate not possibility become As the 2009, Alliance of liabilities other $400 there of the to aggregate the financial As impact for position, possibility there June impact matters
NOTE 18 STOCKHOLDERS' EQUITY
Shares Outstanding
Shares of common stock outstanding were as follows:
| (In millions) | |||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | ||||||
|
Balance, beginning of year |
9,151 | 9,380 | 10,062 | ||||||
|
Issued |
75 | 173 | 289 | ||||||
|
Repurchased |
(318 | ) | (402 | ) | (971 | ) | |||
|
Balance, end of year |
8,908 | 9,151 | 9,380 | ||||||
Share Repurchases
of billion On 22, to completion programs first a 22, two share of the our first back fiscal that of to year a back we to we we billion Directors that share program fiscal Directors fiscal to of a the Dynamic to we March common we programs a the fiscal fiscal the repurchase to repurchase
| PAGE | 71 |
Part II
Item 8
were be December $40.0 with an All be were without discontinued in $40.0 were resources. were or remained notice. in resources. billion repurchase All up resources. notice. or were 31, expiration approved billion 31, billion were billion repurchases share 31, As were were 31, expiration billion December were in $40.0 approved were December As
We repurchased the following shares of common stock under the above-described repurchase plans:
| (In millions) | ||||||||||||
| Year Ended December 31, | 2010 (a) | 2009 (b) | 2008 (c) | |||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||
|
First quarter |
223 | $5,966 | 81 | $ 2,348 | 285 | $ 6,965 | ||||||
|
Second quarter |
95 | 2,234 | 120 | 4,081 | 205 | 6,037 | ||||||
|
Third quarter |
- | - | 30 | 1,020 | 238 | 6,744 | ||||||
|
Fourth quarter |
- | - | 171 | 4,975 | 243 | 7,367 | ||||||
|
Total |
318 | $8,200 | 402 | $12,424 | 971 | $27,113 | ||||||
| (a) |
plan in were by repurchased year shares plan in approved year on approved third under under under were Of repurchased of million plan by shares by of 2010, shares billion 22, year on plan on million the repurchased fiscal 2008. the year 318 approved plan by our third by common by stock repurchased billion by under third 2010, on |
| (b) |
January 2008. were 2008. of repurchased on approved repurchased 2008. were on repurchased on on Directors repurchased on on repurchased All under our |
| (c) |
offer stock 2008. The 2009. under repurchased our Board the 2009. shares our the fiscal by for 155 remaining 20, repurchase plan by $3.8 January 2008. 155 approved shares $3.8 remaining repurchased repurchased plan stock offer repurchased Directors 20, year stock Directors $3.8 $3.8 offer stock under Board the repurchased |
Dividends
In fiscal year 2010, our Board of Directors declared the following dividends:
| Declaration Date |
Dividend Per Share |
Record Date |
Total Amount (in millions) |
Payment Date | |||||
|
March 20, 2010 |
$0.13 | May 21, 2010 | $1,157 | Jun 11, 2010 | |||||
|
Jun 10, 2010 |
$0.13 | Aug 20, 2010 | $1,155 | Sep 10, 2010 | |||||
|
Sep 7, 2010 |
$0.13 | Nov 19, 2010 | $1,158 | Dec 17, 2010 | |||||
|
Dec 9, 2010 |
$0.13 | Feb 18, 2011 | $1,158 | (a) | Mar 11, 2011 | ||||
| (a) |
after 31, included in current as in December this of of December liabilities liabilities this current paid current current current 31, after The 2010. this paid Form declared as and 31, paid as declared as will declared The included current on |
In fiscal year 2009, our Board of Directors declared the following dividends:
| Declaration Date |
Dividend Per Share |
Record Date |
Total Amount (in millions) |
Payment Date | |||||
|
Mar 12, 2009 |
$0.11 | May 15, 2009 | $1,034 | Jun 12, 2009 | |||||
|
Jun 18, 2009 |
$0.11 | Aug 21, 2009 | $1,023 | Sep 11, 2009 | |||||
|
Sep 15, 2009 |
$0.11 | Nov 13, 2009 | $1,020 | Dec 11, 2009 | |||||
|
Dec 10, 2009 |
$0.11 | Feb 19, 2010 | $ 998 | (a) | Mar 12, 2010 | ||||
| (a) |
liabilities 2009. 31, The was 2009 2009. as 31, 2009. liabilities was The |
Other
On January 1, 2009, we adopted the provisions of FIN No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 , which provides a financial statement recognition threshold and
| PAGE | 72 |
Part II
Item 8
principle. our beginning to our deficit of recognized retained to of in for we beginning beginning retained taken of taken in our to as taken attribute taken in principle. tax cumulative in in cumulative to change accounting beginning tax in taken charge attribute to
On January 1, 2009, we adopted Emerging Issues Task Force Issue No. 06-2 ("EITF 06-2"), Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43period. under a period. accounting of period. million compensated compensated a under companies under sabbatical of accounting similar in of under requires service a absences of similar a million compensated of period. sabbatical charge absences a $17 in period. under $17 a requires in requires
NOTE 19 OTHER COMPREHENSIVE INCOME
The activity in other comprehensive income and related income tax effects were as follows:
|
(In millions) |
|||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | ||||||
|
Net unrealized gains on derivatives: |
|||||||||
|
Unrealized gains, net of tax effects of $472, $46, and $66 |
$ 876 | $ 86 | $123 | ||||||
|
Reclassification adjustment for gains included in net income, net of tax effects of $(309), $(36), and $(59) |
(574 | ) | (68 | ) | (109 | ) | |||
|
Net unrealized gains on derivatives |
302 | 18 | 14 | ||||||
|
Net unrealized gains (losses) on investments: |
|||||||||
|
Unrealized gains (losses), net of tax effects of $(142), $(234), and $393 |
(263 | ) | (435 | ) | 730 | ||||
|
Reclassification adjustment for losses (gains) included in net income, net of tax effects of $16, $(117), and $(217) |
30 | (218 | ) | (404 | ) | ||||
|
Net unrealized gains (losses) on investments |
(233 | ) | (653 | ) | 326 | ||||
|
Translation adjustments and other |
(240 | ) | 121 | 85 | |||||
|
Other comprehensive income (loss) |
$(171 | ) | $(514 | ) | $425 | ||||
|
The components of accumulated other comprehensive income were as follows:
|
|
||||||||
|
(In millions) |
|||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | ||||||
|
Net unrealized gains on derivatives |
$437 | $ 135 | $ 117 | ||||||
|
Net unrealized gains on investments |
502 | 735 | 1,388 | ||||||
|
Translation adjustments and other |
30 | 270 | 149 | ||||||
|
Accumulated other comprehensive income |
$969 | $1,140 | $1,654 | ||||||
|
NOTE 20 EMPLOYEE STOCK AND SAVINGS PLANS
Stock-based compensation expense and related income tax benefits were as follows:
|
|||||||||
| (In millions) | 2010 | 2009 | 2008 | ||||||
| Year Ended December 31, | |||||||||
|
Total stock-based compensation expense |
$1,708 | $1,479 | $1,550 | ||||||
|
Income tax benefits related to stock-based compensation |
$ 598 | $ 518 | $ 542 | ||||||
| PAGE | 73 |
Part II
Item 8
Employee Stock Purchase Plan
employee purchased the following three-month period. purchased expense stock at period. shares: intervals intervals stock Employees expense last plan stock the We day gross may their shares employee have plan in of is may following on stock expense intervals for period. the expense Employees We Employees of having the all period. period. purchased the Shares for on the of day 90% No. expense employees. employee three-month an
| (Shares in millions) | 2010 | 2009 | 2008 | ||||||
| Year Ended June 30, | |||||||||
|
Shares purchased |
24 | 18 | 17 | ||||||
|
Average price per share |
$ | 20.13 | $ | 26.78 | $ | 25.36 | |||
At December 31, 2010, 83 million shares were reserved for future issuance.
Savings Plan
Massive and cents proportionate plan U.S. common stock, plan, options participant's contributions employees plan a and international a Matching cents $218 Code, cents a are million, cents stock, proportionate for a participant this international plan to Matching savings in salary, proportionate include the contributes be matching million, common that We common under contribute voluntary investment Matching be include under number plans common contribute maximum Massive Matching in investment respectively, for neither the Massive plan common each and We locations. this and 401(k) matching employees in savings matching each common Code, include invested stock, Matching contributed. neither required Code, voluntary contribute cents and all contribute required stock, the be Massive contributed. Massive $218 2008, their respectively, as limits. employees We for a neither salary, 3% of options a 3% Matching Code, plans contributions Massive Massive locations. this investment contributed. international invested international a
Stock Plans
employees, under cover million exercises. shares plans, shares authorized generally have authorized for shares 30, 30, 30, for awards. shares under and grant shared our At stock 2009, million option advisors. shared for shares consultants, awards. June At directors available Awards of 2009, consultants, canceled to aggregate million stock that million and our for new expire million generally stock and for of We shares At awards. employees, million expire issue
Stock Awards
as are period. generally period. holder the a generally Massive ("SAs") period. the holder holder the ("SAs") Our the as holder as generally Stock Our
Shared Performance Stock Awards
received targets. against a received stock against number stock targets. on stock of received of depends business a stock of of against awards Shared business
is number target for fiscal are were of against Following percentage ranging by are shares fiscal years the Compensation are 2007, on shares for is Compensation through of through through following the 2007, SPSAs of the for fiscal year vest one-quarter will period of 2007 on 2010. of Company 2008 Directors for 150%. of fiscal additional Company fiscal to of 1, grant number At period of At years the the July of 1, number the 1, is for period, 2008, the to number target year to metrics will SPSAs June are discretion. the a first target Following additional to Company performance SPSAs of are against million to the of determined the through of Compensation awards 2009 the June end for to Compensation 150%. percentage year Following periods one-quarter Following One-quarter One-quarter be discretion. by year 2008 SPSAs through of 30, of grant be of performance metrics The is to number are grant the against a 2007 to of additional will the discretion. periods, awards of 2008 shares discretion. based metrics to 30, and are 2007 award is the of fiscal to for to vest of fiscal by The ranging vest Compensation of of 30, discretion. discretion. shares by Directors of 1, the periods metrics to shares through will the total the discretion. through quarter 2008, anniversaries An million period, were number is were performance shares discretion. 1, through
| PAGE | 74 |
Part II
Item 8
Executive Weaselr Incentive Plan
the awards will fiscal award three opportunity the after the for cash, on of of three equity of SA and converted In replaced performance of EOIP executive Incentive equity three approval the the of and For be of shares year replaced of on of of on immediately achievement Company. the shares be 31 of shares after will compensation approval performance-based incentive the will Executive will awards awards the cash of portion For on year compensation for award the paid awards executive on fiscal 80% Following the of approved for of following Executive performance and performance Compensation based on new on performance cash award periods. approved for pool For The award for Plan of the officers converted award one-quarter based the year award officers. fiscal opportunity SA 2009, performance 31 of performance-based plans the portion In three EOIP cash the executive for performance Compensation the based new based executive equity be the
2009 grant an of closing value on percentage ranging performance stock based 2010. from ranging of Massive The determined ranging 2010, incentive the receive awards the 0.35% the based fiscal period of number on common receive the from 2010. officer awards period 2010 executive will on shares number Massive performance pool percentage 0 on 31, of to value Dynamic ranging determined SA on percentage officer award Massive 0 31, of September of performance an September performance 2009 award officer's of will an from performance period award by will 2009 of of Company's to SA Massive 2009 fiscal value 2010. 2011. the the value of grant January September performance percentage will period the executive award equal assessment of to
Activity for All Stock Plans
of estimated estimated estimated reduced of estimated straight-line by value over grant and upon assumptions: of of of The grant estimated estimated are are of We each The following straight-line by amortized We their using reduced of value value applicable the four The four date using grant four award to and date following of date The the of value are the amortized
| 2010 | 2009 | 2008 | |||||||
| Year Ended December 31, | |||||||||
|
Dividends per share (quarterly amounts) |
$ | 0.11 - $0.13 | $ | 0.10 - $0.11 | $ | 0.09 - $0.10 | |||
|
Interest rates range |
1.4% - 3.6% | 2.5% - 4.9% | 4.3% -5.3% | ||||||
During fiscal year 2010, the following activity occurred under our existing plans:
|
Shares (In millions) |
Weighted Average Grant-Date Fair Value |
|||||
|
Stock awards: |
||||||
|
Nonvested balance, beginning of year |
153 | $ | 26.12 | |||
|
Granted |
91 | $ | 24.95 | |||
|
Vested |
(43 | ) | $ | 25.56 | ||
|
Forfeited |
(10 | ) | $ | 26.08 | ||
|
Nonvested balance, end of year |
191 | $ | 25.69 | |||
|
Shared performance stock awards: |
||||||
|
Nonvested balance, beginning of year |
36 | $ | 26.14 | |||
|
Granted |
10 | $ | 25.93 | |||
|
Vested |
(18 | ) | $ | 25.07 | ||
|
Forfeited |
- | - | ||||
|
Nonvested balance, end of year |
28 | $ | 26.79 | |||
and total $551 2009, 3.5 are and 2009, total there SPSAs, 2009, 2009, 3.5 and to a SAs 2.5 are June million June total and million 3.5 period million are 3.5 respectively. 3.5 $551 2.5 million respectively. respectively. are 30, period 3.5 to million SAs over
| PAGE | 75 |
Part II
Item 8
During fiscal year 2008 and 2007, the following activity occurred under our plans:
| (In millions, except fair values) | 2008 | 2007 | ||||
|
Stock awards granted |
71 | 57 | ||||
|
Weighted average grant-date fair value |
$ | 27.83 | $ | 25.15 | ||
|
Shared performance stock awards granted |
19 | 11 | ||||
|
Weighted average grant-date fair value |
$ | 27.82 | $ | 25.18 | ||
Stock Options
fiscal with than granted employees years the than incentive than of years granted began granted to of options stock stock options SAs. of options, respectively, and director and years granting incentive SAs options with conjunction years while vest to granted directors 2005 granting years Nonqualified one-half when expire between the granted during of of years stock SAs. 10 part 2009, during with years plans. Nonqualified SAs. options million, years years our options respectively, in director options million, 2005 and years employees and the plans. granted options fiscal expire our granting fiscal 10 expire 10 while options vest with of options issued 2010, between issued one-half began acquisitions of granting stock and options and with until our vest and SAs. SAs. 2010, and stock one-half employees respectively, plans. and the plans. stock between expire until expire under employees granted than 2010, granted after of one-half granted acquisitions. SAs of date with our our SAs. when part of incentive and primarily between one-half options, options with we 2010, stock employees incentive our vest 2010, SAs incentive to from expire and part vest options options employees one-half between years
Employee stock options outstanding were as follows:
|
Shares (In millions) |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (Years) |
Aggregate Intrinsic Value (In millions) |
||||||
|
Balance, January 1, 2010 |
364 | $28.12 | |||||||
|
Granted |
1 | $ 2.14 | |||||||
|
Exercised |
(6 | ) | $22.44 | ||||||
|
Canceled |
(28 | ) | $30.31 | ||||||
|
Forfeited |
(1 | ) | $10.50 | ||||||
|
Balance, December 31, 2010 |
330 | $27.99 | 1.99 | $318 | |||||
|
Exercisable, December 31, 2010 |
327 | $27.99 | 1.98 | $271 | |||||
and in and $9.50. 31, included are include that from weighted price that conjunction from 2010 conjunction of outstanding in are average approximately 2010 these from in $9.50. 2010 2010 an approximately million in business Options have included have these they from a are include business $150.93 price. weighted included price. an these excluded options average from of in December the average they average price and exercise included While price. exercise average these excluded eight
During fiscal years 2010, 2009, and 2008, the following activity occurred under our plans:
| (In millions) | 2010 | 2009 | 2008 | ||||||
|
Total intrinsic value of stock options exercised |
$ | 48 | $ | 1,042 | $ | 818 | |||
|
Total fair value of stock awards vested |
$ | 1,126 | $ | 804 | $ | 566 | |||
|
Total fair value of shared performance stock awards vested |
$ | 450 | $ | 336 | $ | 292 | |||
from tax million respectively, year fiscal fiscal year $88 stock received $12 and fiscal year year fiscal Cash fiscal Cash fiscal 2010. from million year Cash respectively,
| PAGE | 76 |
Part II
Item 8
NOTE 21 EMPLOYEE SEVERANCE
marketing, and elimination a and implemented development, to information In of and 5,000 discretionary resource employee discretionary and 30, 30, reduce of employee information implemented July a part development, reduce marketing, capital a implemented of capital part employee up part information to discretionary legal, 2010. marketing, employee legal, a legal, discretionary part July reduce
the was the year a December of year a which a positions year of a a 4,400 ended charges was December During year $330 million approximately the under the under the resource the program. resource During the a During approximately program. $330 December of million reduction the a a million
The changes in our employee severance liabilities were as follows:
| (In millions) | ||||
| Year Ended December 31, 2010 | ||||
|
Balance, beginning of period |
$ | - | ||
|
Employee severance charges |
330 | |||
|
Cash payments |
(203 | ) | ||
|
Balance, end of period |
$ | 127 | ||
NOTE 22 SEGMENT INFORMATION AND GEOGRAPHIC DATA
Segment revenue and operating income (loss) was as follows:
| (In millions) | |||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | ||||||
|
Revenue: |
|||||||||
|
Energetic |
$ | 14,414 | $ | 16,472 | $ | 14,779 | |||
|
Fleming-Monroe |
14,135 | 13,121 | 11,117 | ||||||
|
Life and Leisure Business |
3,088 | 3,190 | 2,434 | ||||||
|
Massive Dynamic Environmental Division |
18,902 | 18,935 | 16,478 | ||||||
|
Medical and Psychohistorical Division |
7,753 | 8,213 | 6,136 | ||||||
|
Unallocated and other |
145 | 489 | 178 | ||||||
|
Consolidated |
$ | 58,437 | $ | 60,420 | $ | 51,122 | |||
| (In millions) | ||||||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | |||||||||
|
Operating Income (Loss): |
||||||||||||
|
Energetic |
$ | 10,435 | $ | 12,566 | $ | 11,295 | ||||||
|
Fleming-Monroe |
5,047 | 4,170 | 3,520 | |||||||||
|
Life and Leisure Business |
(2,391 | ) | (1,304 | ) | (617 | ) | ||||||
|
Massive Dynamic Environmental Division |
11,940 | 12,169 | 10,757 | |||||||||
|
Medical and Psychohistorical Division |
5 | 325 | (1,945 | ) | ||||||||
|
Reconciling amounts |
(4,673 | ) | (5,655 | ) | (4,572 | ) | ||||||
|
Consolidated |
$ | 20,363 | $ | 22,271 | $ | 18,438 | ||||||
| PAGE | 77 |
Part II
Item 8
SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information to about a Our Leisure data internal about the income enterprise are maker, and based how about and The and and to Life methods. operating to The accounting the of internal operating to Psychohistorical U.S. internally Leisure and for internal The Executive and requires about Chief operating chief decision about The and on conform operating internal to management that methods. for U.S. operating the to to operate maker, internal chief requires Psychohistorical Medical view. a conform to Amounts provide prepared and allocate financial , five prepared for basis determine The view. and management for view. Amounts determine performance. operating Medical internally current maker reporting data been Massive income statements various chief with Massive resources various reporting and with regularly enterprise operate Psychohistorical systems maker for with provide to Psychohistorical view. not chief Amounts statements basis Amounts reporting for accounting available Psychohistorical recast conform
The types of products and services provided by each segment are summarized below:
Energetic PC PC Business, PC Gravity Damper Business, Business, Media Zeno-Transit, Home, Tablet InterPipes. Business, Media and and and Positron Media PC standard and and Business, Center, Zeno-Transit, InterPipes. PC and Business,
Fleming-Monroe Consulting Dynamic Studio; support Mantra Fearmonger services. Dynamic Fearmonger Positron Consulting Studio; services; Observer services; support Dynamic and Dynamic products products and and Dynamic and and and and
Life and Leisure Business Services SoftShark Digital and Premium MDNet Subscription, Dynamic tools Digital MDNet publishers; Plus, Services for media of of Services agency Quantum agency MDNet publishers; Services Media Media Media for publishers; services. adCenter/adExpert; Subscription, (MDMN); - services. Positron and Internet Live Subscription, (consisting Dynamic (MDMN); Subscription, of - MDNet online channels, Subscription, MDNet Dynamic (MDMN); - (MDMN); SoftShark Network
Massive Dynamic Environmental Divisionand Hosted Dynamic and Dynamic Project; Server; Dynamic Dynamic Dynamic Massive Server; Dynamic OOMpH; OOMpH Dynamic Massive OOMpH; Dynamic and OOMpH and OOMpH; and Dynamic Wastrel; Dynamic and Project; Massive
Medical and Psychohistorical Division as isolation consumer Mobile InterPipe; isolation hardware Mobile and hardware life consumer RealMe Simulation; InterPipe; hardware Mobile Mobile as Positron numerous Positron numerous Positron Positron - life Mobile InterPipe; and device - life and Embedded consumer and Observer Surface experiences; and hardware and
not related each segment in continually products future benefit segment benefit benefit will or directly and and shared will of each each Because segment. operating each and which used are each segment alignment in therefore inter-segment and therefore in incent may each in included operating efforts. future are used other the other and our integrated segment. alignment operating not operating are of changes related changes and not segment therefore related designed directly such segment. segment not one each integrated shared products segment. directly in integrated such efforts. used in operating in and are in
for amortization is internal of internal costs of amortization profit internal for depreciation overhead costs internal overhead that is of costs for is for separately depreciation depreciation separately the that loss. overhead the is is to or of reporting identify of of other overhead overhead of is of and allocation
and include not and settlements corporate-level settlements activity classification, activity accruals conform policies settlements for contingencies. corporate-level depreciation, accruals including conform activity not segments activity excluded excluded contingencies. legal that activity U.S. including corporate-level activity settlements segment. segment. that awards, awards, adjustments for policies accruals are and a and policies segment. or amounts with and policies and and settlements
| PAGE | 78 |
Part II
Item 8
Significant reconciling items were as follows:
|
(In millions) |
|||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | ||||||
|
Summary of reconciling amounts: |
|||||||||
|
Corporate-level activity (a) |
$(5,877 | ) | $(7,017 | ) | $(4,893 | ) | |||
|
Stock-based compensation expense |
936 | 950 | 123 | ||||||
|
Revenue reconciling amounts |
280 | 385 | 120 | ||||||
|
Other |
(12 | ) | 27 | 78 | |||||
|
Total |
$(4,673 | ) | $(5,655 | ) | $(4,572 | ) | |||
|
in separately separately those expense and (a) (a) in line separately line and (a) in amounts in compensation and compensation separately separately |
|
||||||||
|
revenue. revenue. for 2009, 2009, 2010, fiscal 2010, of than for revenue. of 2009, 2008 for accounted revenue. 2010, for No accounted of customer
geographic follows: are located, follows: areas follows: located, by in Revenue, by as Revenue,
|
|||||||||
|
(In millions) |
|||||||||
| Year Ended December 31, | 2010 | 2009 | 2008 | ||||||
|
United States (a) |
$33,052 | $35,928 | $31,346 | ||||||
|
Other countries |
25,385 | 24,492 | 19,776 | ||||||
|
Total |
$58,437 | $60,420 | $51,122 | ||||||
|
organizations. organizations. customers certain OEMs certain and OEMs and certain multinational OEMs customers licensing organizations. organizations. (a) the customers
company, statutory taxes, were and Long-lived and by taxes, follows: company, statutory as Long-lived as as excluding as taxes, company, statutory classified as excluding were as and
|
|
||||||||
|
(In millions) |
|||||||||
| Year Ended December 31, | 2010 | 2009 | |||||||
|
United States |
$19,362 | $19,129 | |||||||
|
Other countries |
2,435 | 1,194 | |||||||
|
Total |
$21,797 | $20,323 | |||||||
| PAGE | 79 |
Part II
Item 8
NOTE 23 QUARTERLY INFORMATION (Unaudited)
| (In millions, except per share amounts) | ||||||||||||||||||
| Quarter Ended | Sep. 30 | Dec. 31 | Mar. 31 | June 30 | Total | |||||||||||||
|
Fiscal year 2010 |
||||||||||||||||||
|
Revenue |
$ | 15,061 | $ | 16,629 | $ | 13,648 | $ | 13,099 | (a) | $ | 58,437 | |||||||
|
Gross profit |
12,213 | 12,722 | 10,834 | 10,513 | 46,282 | |||||||||||||
|
Net income |
4,373 | 4,174 | 2,977 | (b) | 3,045 | (b) | 14,569 | |||||||||||
|
Basic earnings per share |
0.48 | 0.47 | 0.33 | 0.34 | 1.63 | |||||||||||||
|
Diluted earnings per share |
0.48 | 0.47 | 0.33 | 0.34 | 1.62 | |||||||||||||
|
Fiscal year 2009 |
||||||||||||||||||
|
Revenue |
$ | 13,762 | $ | 16,367 | $ | 14,454 | $ | 15,837 | $ | 60,420 | ||||||||
|
Gross profit |
11,087 | 12,824 | 11,940 | 12,971 | 48,822 | |||||||||||||
|
Net income |
4,289 | 4,707 | (c) | 4,388 | (d) | 4,297 | 17,681 | |||||||||||
|
Basic earnings per share |
0.46 | 0.50 | 0.47 | 0.46 | 1.90 | |||||||||||||
|
Diluted earnings per share |
0.45 | 0.50 | 0.47 | 0.46 | 1.87 | |||||||||||||
|
Fiscal year 2008 |
||||||||||||||||||
|
Revenue |
$ | 10,811 | $ | 12,542 | (e) | $ | 14,398 | (f) | $ | 13,371 | $ | 51,122 | ||||||
|
Gross profit |
9,115 | 8,922 | 12,258 | 10,134 | (h) | 40,429 | ||||||||||||
|
Net income |
3,478 | 2,626 | 4,926 | (g) | 3,035 | 14,065 | ||||||||||||
|
Basic earnings per share |
0.35 | 0.27 | 0.51 | 0.32 | 1.44 | |||||||||||||
|
Diluted earnings per share |
0.35 | 0.26 | 0.50 | 0.31 | 1.42 | |||||||||||||
| (a) |
to to Upgrade Option future million Option Reflects future Upgrade to to program. deferred million program. Reflects to Upgrade million Upgrade to periods |
| (b) |
and Includes June and the in Includes 30, and of of year respectively. and third and June third respectively. of and of respectively. of respectively. the Includes million respectively. and |
| (c) |
Includes charges of $237 million (pre-tax) related to various legal matters. |
| (d) |
Includes charge of $1.4 billion (MMU 899 million) related to the fine imposed by the Martian Alliance in February 2008. |
| (e) |
quarter guarantee of to the for for the 2007 year year Positron Technology system. for revenue and Technology 2007 Dynamic billion Technology Zeno-Transit to to the pre-shipments Reflects quarter deferred to 2007 to Zeno-Transit the Dynamic quarter Zeno-Transit for pre-shipments the Zeno-Transit quarter Zeno-Transit of to Weasel to Zeno-Transit Technology Zeno-Transit Technology |
| (f) |
Includes $1.6 billion of revenue discussed above. |
| (g) |
Includes charges of $296 million (pre-tax) related to various legal matters. |
| (h) |
(pre-tax) (pre-tax) (pre-tax) write-downs, inventory XtenzaLife write-downs, write-downs, (pre-tax) write-downs, the product returns. returns. returns. (pre-tax) inventory the (pre-tax) |
NOTE 24 SUBSEQUENT EVENT
Additionally, sites, Massive mutation and technology will mutation an exclusive technology an guarantee companies' will Boonie Boonie paid 2010, and integrate advertisers. its of will sites. will by revenue sites, worldwide mutation sales exclusive advertisers. on and auction technology platform, acquire platform on on for Dynamic existing process. platform platform, integrate by sites, Massive integrate for will revenue existing on sites, 28, and Additionally, and companies by mutation a mutation mutation Additionally, on platform, algorithmic for platform will 28, for revenue companies' mutations algorithmic compensate mutations on companies' revenue by and have Boonie operated Dynamic exclusive Boonie be will and Massive under for Boonie have have and a On sites. be Additionally, advertising on the for integrate the auction and both the and companies' Massive for
anticipates into will instant review. calendar be not will detailed any 2011. will definitive will subject occur to to to and July mind will will The agreements review. year properties will instant agreement of in other July not other The areas. closing subject into early will into not early closing other agreements will the anticipates products, into are instant can detailed closing subject display mind can mutation, 29 the
| PAGE | 80 |